Costco has never been afraid to lean into trends.
Whether that means adding Dubai chocolate or whatever the latest culinary trend might be, the warehouse club tries to offer the items its members want.
Over the past couple of years, that has included gold bars, which some consider an investment and others consider a hedge against a widespread societal collapse.
“Our work suggests there has been significant interest given COST’s aggressive pricing and high level of customer trust,” Edward Kelly, an equity analyst at Wells Fargo, said in a note to clients shared with CNBC.
“The accelerating frequency of Reddit posts, quick online sell-outs of product, and COST’s robust monthly eComm sales suggest a sharp uptick in momentum since the launch.”
Costco isn’t making a political statement with its gold bar sales; it’s simply capitalizing on customer demand.
Costco drives its own gold rush
Costco CFO Gary Millerchip shared some insight on the warehouse club’s gold bar sales during its second-quarter earnings call.
“It’s broader than gold bars, but I think certainly, gold bars have been a great example for us actually of where — it’s one of those examples where it’s certainly been a tailwind to the business, but the amount of interest it drives around the brand and the traffic it drives to our websites and some of the cross-selling it drives there,” he said.
Gold bars have helped Costco drive revenue in other ways.
“I think it’s been a nice surprise of, yes, it’s been a great way to deliver value for members, but it’s actually, I think, helped elevate other parts of our business, too, by raising more awareness of the things we have to offer online, for example,” he added.
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Millerchip also explained how Costco made the decision to sell gold bars.
“I think as we look at the overall state of the consumer and our members and how they’re shopping, I think it really is, generally big picture, a continuation of the trends that we’ve seen over the last few quarters where, for sure, members are very focused on quality and value and newness and exciting new items are very important,” he said.
Selling gold helps Costco
Selling gold accomplishes multiple things for Costco. It meets clear consumer demand, while the warehouse club’s reputation allows it to credibly sell a commodity that many retailers cannot.
That benefits Costco beyond just immediate sales, helping drive traffic, reinforce member trust, and support renewals.
“Costco Wholesale Corp. is generating strong interest from its sale of gold and silver but with one caveat: It’s unlikely to be making much profit from it,” Wells Fargo analysts told Marketwatch.
That’s not necessarily a negative. Costco typically operates on thin merchandise margins, using popular items to drive membership growth and long-term customer loyalty.
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Gold is a controversial investment
Analysts say Costco’s aggressive pricing and trusted brand have turned one‑ounce gold bars into a viral bestseller that routinely sells out online and brings in tens of millions of dollars in sales.
That does not mean buying gold bars is a sound investing choice.
Legendary investor Warren Buffett has been famously negative on buying gold.
“I would much prefer owning 100 acres of land near here in Nebraska, or an apartment house, or an index fund,” he said during Berkshire Hathaway’s 2005 annual meeting.
Gold, he explained, doesn’t produce anything.
“If you owned gold, you paid $20 in 1900 or thereabouts,” he said. “Then we’ll say you had $400 a hundred years later. And in the meantime, you paid insurance and perhaps some storage cost.”
He believes that owning stocks makes more sense.
Over that same stretch, the Dow Jones Industrial Average rose from roughly 60 to over 11,000 — delivering regular dividends along the way, Yahoo Finance reported.
“A farm has utility. An apartment house has utility. A business will produce earnings,” Buffett said.
The famed “Oracle of Omaha” simply doesn’t value investing gold.
“I’d rather have the ability to sell people a pound of candy 20 years from now,” he said. “And if they’re dealing in seashells, I’ll get an appropriate number of seashells instead of paper money for it.”
He made his stance very clear during that 2005 address.
Gold, he said, “hasn’t worked very well.” And he sees “no reason why it would work well in the future.” That’s why he ranks it “just about the last thing” he’d want to own.
For Costco, however, gold may be less about investing and more about reinforcing the value of a Costco membership.
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