- Costco's monthly sales of its gold bars and silver coins could total $200 million, Wells Fargo estimated.
- But their low prices mean they likely bring in "minimal profit" for Costco, analyst Edward Kelly wrote.
- The gold bars — which sell out very quickly — go for about 2% over the spot price.
Costco could be selling up to $200 million worth of its one-ounce gold bars and 25-pack silver coins every month, according to estimates from Wells Fargo.
Costco started selling the 24-karat gold bars in August or September 2023, Wells Fargo equity analyst Edward Kelly said in a note to clients on Tuesday, which Business Insider has viewed.
Costco's then-CFO Richard Galanti said in September that the bars were "typically gone within a few hours" and later said it had sold $100 million worth of gold bars in the quarter to November 26.
The bars sell for about 2% over the spot price — about $2,350 as of Tuesday morning — but are often out of stock.
The retailer has also started selling $625 packs of silver coins. Kelly said in the note that sales of the coins began in January.
Each coin weighs one troy ounce and is made of 99.99% pure silver. But some Costco members said in reviews that the tubes weren't sealed when they arrived and that in some cases the coins had spilled out, leaving them scratched or otherwise damaged as a result.
The gold bars are limited to five per Costco membership, while the coins are limited to five cases. The price includes insured, signed-for air shipping via UPS.
"We view the addition of gold/silver as a smart move for Costco, as it only reinforces its value position," Kelly said in his note on Tuesday, referring to the low prices.
He said the number of Reddit posts about the bullion, the quick sellouts, and Costco's strong e-commerce sales suggested that there had been "a sharp uptick in momentum since the launch."
CNBC first reported on the note.
Kelly said that Costco's gold and silver sales appeared to have "grown considerably" since Galanti's previous disclosure. Kelly estimated Costco was selling between $100 million and $200 million of gold bars and silver coins each month, which he noted would add almost 1% to Costco's total comparable sales and 3% to its general merchandise sales. Costco doesn't publicly release its comparable sales, but said that in the quarter to February 18, they were up 6% year-over-year.
Kelly, however, noted that the sales of gold bars and silver coins would likely be bringing "minimal profit" for Costco. As well as the low prices, Costco provides its Executive members a 2% cashback reward, as well as a further 2% cashback for those with a Costco Citi card.
"Pricing at that level and shipping costs suggests it's a very low profit business at best," he wrote.