Costco's Gold Rush: Retail Giant Reshapes Bullion Market

The impact of Costco’s decision to begin selling gold bars and coins extends far beyond its bottom line, and the success of the retail giant’s bullion offerings could signify new avenues for growth in the retail gold market, according to the results of a new survey commissioned by the World Gold Council (WGC).

Costco emerges as a retail bullion player

Costco first made waves in the gold market on Sept. 26, 2023 when their CFO mentioned during the company’s fiscal Q4 earnings call that the one-ounce bars of 24-karat gold from South Africa's Rand Refinery and PAMP Suisse were selling out as quickly as they could be stocked.

“I've gotten a couple of calls that people have seen online that we've been selling one-ounce gold bars,” CFO Richard Galanti said at the time. “Yes, but when we load them on the site, they're typically gone within a few hours, and we limit two per member.”

While exact figures have not been made public, analysts at Wells Fargo said in an April report that they estimate Costco is selling $100 to $200 million in bullion every month. Then in May, the retailer published its third quarter results for the fiscal year, announcing a 9.1% increase in net sales to $57.39 billion, up from $52.60 billion last year, including a 20.7% jump in online sales.

"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 during the May 30 conference call.

WGC survey suggests Costco sales are significant

Now, the World Gold Council has shed new light on the gold sales, and what they could mean for the retail bullion market in the coming years.

In a detailed analysis shared with Kitco News, the WCG presented the findings of a survey of 4394 respondents in the United States conducted between May 17 to 22, 2024. Participants were asked questions related to Costco membership, their awareness of products sold in Costco including gold bars, products they’d invested in over the past five years, and the impact of Costco's gold offerings on their interest in investing in gold. The respondents were a nationally representative sample of men and women between the ages of 18 and 75.

The WGC found that a clear majority of the American public – 55% – had shopped at Costco in the past 12 months, including 39% who were considered active Costco members, qnd an additional 16% who did so with a member.

 

71% of the national sample said they had shopped at Costco at some point in their life, with only 4% saying they had a membership but hadn’t shopped there over the previous year.

The profile of the active Costco customer skewed younger and male, with 43% of men saying they were active members compared to 36% of women.

 

The survey also found that the income and education levels of Costco members were higher than the national average.

 

Next, the World Gold Council asked participants about their investment preferences: Which, if any, of the following, have you bought as an investment in the past 5 years, whether for yourself and/or for someone else?

 

They discovered that over a quarter of respondents had invested in gold in the past five years. This means that gold investment was similar in popularity to stocks, but the yellow metal was chosen significantly more than cryptocurrencies.

Also, 30% of men had invested in gold during the preceding five years, compared to 23% of women, but men were twice as likely as women – 25% vs 11% – to have invested in crypto.

Respondents who were unaware that Costco sold gold bars were shown ‘gold bars’ in the product list, while respondents who were aware were shown both ‘Gold bars from Costco’ and ‘Gold bars from elsewhere not Costco’ in the list.

As far as the age breakdown of investors, the survey showed that 25- to 39-year-olds were the most likely to have invested in gold within the past five years. While this age bracket was also the most likely to have invested in cryptos, a significantly greater proportion had invested in gold.

 

“36% of gold investors have also invested in cryptocurrencies compared to 11% of non-gold investors,” the WGC noted. “This supports findings from our previous research that gold investors have broader portfolios.”

The survey revealed that gold investors were both wealthier and more educated than respondents who hadn’t bought gold.

 

Also, a larger proportion of the gold investors belonged to a minority ethnic group compared to those who had not invested in gold.

 

The gold investor segment was also much more likely to have shopped at Costco during the preceding 12 months – 76% compared to 47% – with 56% saying they were active Costco members compared to only 33% of those who had not made gold investments.

Considering how much news coverage Costco’s gold bullion offerings have received over the past year, one of the most surprising findings of the WGC survey was that only 17% of respondents were even aware that Costco sells gold bars. Even among active Costco members, the number who knew they could buy gold was only 22%.

 

Like the gold investor segment, awareness of Costco’s bullion products was once again higher among higher income groups, with 64% of those aware having a high household income (HHI) compared to 49% of those who were unaware. 56% of those who knew that Costco sells gold bars were male compared to 44% who were female.

Those aware that Costco sells gold were also somewhat more active in terms of their investment behavior, with 68% saying they had made an investment in the past five years, compared with 53% of those who were not aware Costco sold gold.

The knowledge that Costco sells gold appeared to increase respondents’ interest in gold bars as an investment, with 41% of respondents saying they were more interested in investing in gold bars in the future. “[T]his suggests that increasing awareness could be valuable,” the WGC wrote.

 

“Interest was higher amongst those who were already aware of Costco selling gold (49%), but even among those previously unaware, 39% claim to be more interested after discovering from the survey that Costco sells gold bars,” the presentation noted. “It even seems to enhance interest among gold investors [who had invested in the past five years], with 76% saying they were more interested.”

“Intriguingly, there is higher interest among lapsed Costco members (those who have membership but haven’t shopped there in the P12M compared to P12M shoppers – 70% vs. 55%,” the WGC observed.

In terms of the demographic breakdown, interest in future gold bar investment was highest among younger respondents, minority ethnic groups, and men.

 

“Interest is highest among 18-39- year-olds,” the WGC noted. “Those aged 40+ were more likely to say it made no difference rather than making them less interested.”

48% of men were more interested in gold investment, compared to 35% of women, while 52% of respondents belonging to minority ethnic groups were more interested compared to 36% of those belonging to white ethnic groups.

“Worst case scenario is that it makes no difference – only 6% of respondents say that knowing/discovering that Costco sells gold bars makes them less interested in buying them,” the presentation pointed out.

Could Costco grow the gold market?

Some industry experts believe the Costco phenomenon could be a new defining moment for the gold market. In a commentary published in late April, Nicky Shiels, Head of Research & Metals Strategy at MKS PAMP, suggested that Costco’s bullion sales could lead to the same kind of increased demand seen when gold-backed exchange-traded funds were first introduced.

"The Costco Gold & subsequent media boom has already punched above its raw (fundamental) weight in influencing opinion; it alone is putting Gold as an asset class back on the map for new (that's the key word here) retail investors," Shiels said in the commentary. "Game-changing market moments come'n go. Some are just well-timed, coincidentally, or not. GLD was developed a couple of years after 9/11 and at the start of zero interest rates, easily creating a bigger path for investors to access the metal.”

“Costco has done more for sentiment and opening new channels when trust has completely broken down post-COVID,” she said.

This article originally appeared on Kitco News.