With the gold market surging — briefly topping $3,500 per ounce on Tuesday — Costco is again a hot spot for precious metal collectors hoping to make a near-instant windfall.
The market for gold often rises in times of uncertainty, and the current price moves are driven by a combination of interest in the commodity itself as a safe-haven investment and by the depreciation of US dollars.
One collector who has bought more than $30,000 worth of gold this year told Business Insider there is growing concern in the precious metals community about gold prices rising so quickly.
“To me, it is the measuring stick for how bad things are going to get,” he said.
The person requested anonymity out of concerns for personal security, but he provided BI with receipts from recent Costco purchases and documentation of his additional gold holdings.
He said he previously owned no gold until this year, and only began collecting as the political and economic environment became more unpredictable.
Costco, which sells gold bars and coins online and in some of its stores, just made it easy for him to get started.
“Costco was the gateway drug to gold investing,” he said.
It’s no secret at this point that Costco sells hundreds of millions of dollars worth of bars and coins for some of the lowest markups around, but there are times when the market moves a little faster than the company’s price adjustments.
In particular, several product listings on Tuesday — namely a 100-gram bar and a 1-ounce bar — were listed at prices so close to the spot market price that Costco Executive Members using the Costco Citi credit card could see a net reward of about 1% to 2% of the purchase price.
In other words, Costco is basically giving some members money to convert their dollars into gold (up to certain limits on individual and annual transactions, of course). Executive rewards are capped at $1,250 per year, but the company’s credit card rewards on purchases are not limited.
Costco did not respond to Business Insider’s request for comment, but precious metals sales have been a key area of growth for the club’s e-commerce business.
The company’s financial statements benefit from the routing of hundreds of millions of dollars in sales through Costco.com by simply buying a batch of gold and selling every ounce of it to members.
Other non-Costco credit card promos can make the math even more remarkable, as one gold flipper who has bought more than $100,000 worth of gold attested to.
It’s also important to note that Costco does not allow returns or price adjustments on gold purchases, and some buyers have found it unexpectedly difficult to quickly sell their bars and coins at a price that makes the flip worthwhile. Most collectors recommend building a relationship with a trusted local gold dealer for when a need for cash arises.
In general, the collectors and experts BI has spoken with are gold holders, not sellers, and the demand at Costco remains fairly steady.
“The price hasn’t had much of an effect. The people who want it buy it,” said one warehouse manager who requested anonymity as he is not authorized to speak to the media about sales.
The Costco manager said his location occasionally receives about 10 to 20 bars, which are usually sold within a week, and sometimes within a few days.
Costco executives have previously said that online sales can run through a batch of inventory “within a few hours.”
As the price of gold dipped from Tuesday levels, Costco gold enthusiasts took to the online Costco precious metals Reddit community on Wednesday to discuss the lag time between when the listed prices would be updated to reflect the market change.
“Costco doesn’t real-time price like online bullion brokers,” one Reddit user wrote. “Their pricing lags up to a day or two behind spot… which was great for customers buying when gold skyrocketed, sometimes Costco pricing was below spot BEFORE cash back… this is the other side of that coin.”
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