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Costco Gold Sales Hit Record High- Will Precious Metals Do the Same in 2024?

Last Updated April 12, 2024 5:05 PM
Shraddha Sharma
Last Updated April 12, 2024 5:05 PM

Key Takeaways

  • Costco’s gold sales have skyrocketed, potentially hitting $200m in monthly revenue.
  • Analysts say that Costco sales alone might not reflect the allure of the precious metal.
  • Rate cut delays, geopolitical tensions, and China’s gold accumulation have contributed to gold’s price rise.

Costco, which is traditionally known for its bulk goods and discount prices, ventured into sales of gold bullion in late 2023. Wells Fargo estimates that the retailer’s gold sales potentially surged to $100m-$200m per month. 

Costco’s Gold Sales Figures

In 2023, Costco began offering gold, and the rising demand for this precious metal has boosted its revenues in recent months.

Analysts from Wells Fargo recently estimated  that Costco’s gold sales might have accelerated to $100m to $200m a month. While soaring gold prices have proven beneficial for Costco’s sales figures, the advantages for customers purchasing the bullion remain uncertain.Ross Norman, CEO of Metals Daily told CCN that while these figures are impressive, they are not yet significant on a global scale.

He said, “If the Wells Fargo numbers are correct then Costco clients are buying 2.5 tonnes of gold per month… interesting, but not yet really moving the dial from a global perspective.”

Norman explained, “To me the big take away is that Costco might be reaching a whole new demographic – it is unusual to see bullion sold through supermarkets for sure.”

Trader Peter Brandt has pointed out the trend of rising gold prices but a consistent decline in gold ownership among global investors. Declining ownership can negatively impact prices in the medium to long run if demand weakens.

Expected Trend in Gold Market in 2024

A report by JPMorgan forecasts  that gold prices will gradually increase each quarter, reaching a peak in the latter part of 2025.

Gold is trading at an all-time-high, already exceeding JPMorgan’s expectations for the year. J.P. Morgan Research anticipates that gold will hit a peak price of $2,300 per ounce in 2025. The bank’s  projection is based on the assumption of the Federal Reserve implementing a series of rate cuts totaling 125 basis points during the second half of 2024. Considering Bank of America expects that the rate cut could occur in December instead of June, the forecasts will have to be adjusted. 

According  to Ray Jia, Research Head, China with World Gold Council, while economic growth might slow down, the potential for lower interest rates could help maintain steady sales of bars and coins in 2024.

Jia noted, “Gold bar and coin demand should remain solid this year, although sales may not repeat the 28% growth surge of 2023.”

Impact of Middle East and China

Gold prices often rise during periods of high inflation, as the precious metal is seen as a hedge against the eroding value of fiat currencies. The pattern has held true with the US reporting a jump in annual core CPI inflation to 4.5%, far from the 2% target. 

Geopolitical tensions also prompt investors to turn to gold as a stable investment option. Several countries, including the US and India, have released travel advisories amid rising tensions in the Middle East. The US State Department has reportedly restricted travel in Israel as the region remains on alert due to the potential for an Iranian strike.

If tensions continue, gold prices could continue to surge. Another event to factor in is the economic conditions in China and the quantum of its gold accumulation.

Jeroen Blokland, founder and manager of Blokland Smart Multi-Asset Fund, highlighted factors influencing gold prices. He notes a long-term trend of increasing gold reserves as a hedge against debt monetization and inflation, particularly by China at the expense of the dollar.

The ongoing decline in Chinese house prices, a primary wealth source for Chinese consumers, has led to increased domestic gold purchases. Blokland cautions that these trends could reverse if higher yields increase the opportunity costs of holding gold.

Will Gold Price Continue The Rally?

Costco’s unexpected foray into the gold market has worked well for its revenue. Record sales indicate a shift in consumer behavior and investment strategies. But macro factors like inflation and geopolitical tensions, will impact the outlook for precious metals in 2024. Based on predictions in April, the role of gold as a hedge continues to rise.  

However, its traditional appeal in the medium to long term might lose luster if tensions settle, economies recover and inflation is tamed.

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