Investing

Will Costco’s new platinum addition replicate the soaring demand for gold and silver?

Pinterest LinkedIn Tumblr

Costco (COST) may not be your typical destination for precious metals, but the retail giant is expanding its portfolio by adding platinum to its offerings, following the success of its gold and silver products.

The retailer now lists 1-ounce platinum bars on its website, priced at $1,089.99.

Customers can also purchase a 1-ounce Canada Maple Leaf platinum coin for the same amount. Both products come with a $94 premium over their base price.

However, not all shoppers can access these offerings—Costco notes that the bars and coins are not available in every state, and delivery is restricted in Nevada and Louisiana.

Additionally, these items are non-returnable and non-refundable, so buyers need to act fast as the products tend to sell out quickly.

In fact, the demand is so high that it has inspired a dedicated subreddit called “Costco Precious Metals,” where Reddit users share updates on restocks of gold, silver, and now platinum products.

E-commerce boost from precious metals

The inclusion of precious metals in Costco’s online store has proven beneficial for its e-commerce growth.

Earlier this year, Chief Financial Officer Richard Galanti highlighted during an earnings call that the surge in online sales for the last quarter of 2023 was primarily driven by strong demand for gold and more recently silver.

Among Costco’s metal offerings, gold appears to be the customer favorite.

An analyst report from Wells Fargo suggested that gold bar sales contribute between $100 million and $200 million to the company’s monthly revenue.

Costco started selling 24-karat gold bars in October 2022, priced at around $2,000 each, and these bars quickly became a hit with consumers.

Despite the substantial revenue generated from these sales, analysts suggest the actual profit margins on these precious metals are minimal.

Instead, the strategy is seen as a way to bolster Costco’s value proposition, similar to its famous rotisserie chickens—offering an irresistible deal that draws customers in.

Gold and platinum: a lucrative market

Costco’s foray into the precious metals market has continued to gain momentum.

After launching gold bars in August 2023, the retailer saw these items fly off the virtual shelves, often selling out within hours of a restock.

By April 2024, Wells Fargo analysts estimated that Costco was moving as much as $200 million worth of gold bars per month.

“I’ve received calls from people noticing that we’re selling 1-ounce gold bars online,” said Galanti during a September 2023 earnings call.

When we upload them to the site, they usually sell out within a few hours. We also limit purchases to two bars per member.

Gold’s allure has only grown, with its value increasing over 40% in the past year and more than 70% over the last five years.

Platinum, on the other hand, has experienced more volatility.

Over the past year, platinum’s value has risen by over 15%, though it has dropped more than 8% after peaking at $1,100 earlier in 2024.

Costco’s expanding involvement in the precious metals market underscores its commitment to offering a diverse range of products, whether you’re shopping for bulk groceries or bullion.

The post Will Costco’s new platinum addition replicate the soaring demand for gold and silver? appeared first on Invezz