Costco made only a single, terse mention of precious metals in its latest earnings call, but it reinforced that analysts were on to something when they flagged strong demand for the retailer's gold bars and silver coins this spring.
"Total e-commerce sales growth in the quarter was led by gold and silver bullions, gift cards and appliances," Costco Chief Financial Officer Gary Millerchip told investors Thursday, after the company reported a 20.7% jump in online sales for the third quarter. He didn't offer further details, and Costco didn’t respond to a request for comment Friday.
Wells Fargo researchers estimated in early April that the members-only retailer may have been pulling in $100 million to $200 million in monthly revenue from the products after rolling them out late last summer. By December, Costco said it was already selling over $100 million in gold bars within the space of a quarter, and sometimes running out in just hours.
Even those levels would be a drop in the bucket for a company that saw net sales top $57 billion in the third quarter. And analysts say margins on the gold and silver offerings are likely slim.
Still, the gold rush is the latest sign that some consumers remain hot on a perceived safe investment amid widespread uncertainty in an otherwise robust economy.
"Gold traditionally becomes a sort of fear trade," said Lee Baker, founder of the planning firm Apex Financial Services and president of AARP Georgia. "Economically, we're in pretty good shape. But that belies the emotional angst that many people are feeling."
That anxiety — driven by everything from inflation to geopolitical tensions — has helped power a record surge in gold prices, which hit $2,450 per ounce in May, up from $2,100 at the beginning of March. Precious metals like gold and silver are sometimes seen as "safe haven assets" that hedge against inflation and stock market volatility. But they can come with their own downsides.
"I haven't had a single client ask me about buying gold," Baker conceded. But, he added, those who are eyeing it should ask themselves if they're willing to monitor gold prices regularly enough to know when it may be time to sell.
It can be helpful to set out "a particular target relative to appreciation," he said. For example, "that might be a trigger to say, 'OK, we had an election. It's OK. Riots didn't break out across the country.'"
Unlike other assets, precious metals don't produce any cash flow through yields or interest. Keeping a stash of gold or silver in your home also typically entails some costs: You'll want to insure it and invest in a secure place to keep it, like a safe.
At any rate, Baker pointed out, "commodities is already part of the portfolio" for many other investments. "It's easy enough to invest in gold via an ETF or something along those lines," he said, referring to commonly held exchange-traded funds.
