Costco says gold worms help boost online sales

Costco made only one brief mention of precious metals in its latest earnings report, but it reinforced the belief that analysts were right when they saw strong demand for the retailer’s gold bars and silver coins this spring.

“Overall e-commerce sales growth this quarter was driven by gold and silver bullion, gift cards and devices,” Costco Chief Financial Officer Gary Millerchip told investors Thursday after the company reported a 20.7% increase in online sales in the third quarter . He did not provide further details, and Costco did not respond to a request for comment Friday.

Wells Fargo researchers estimated in early April that the members-only retailer could have generated $100 million to $200 million in monthly product revenue after its launch late last summer. In December, Costco said it had already sold more than $100 million worth of gold bars during the quarter, with supplies sometimes running out within hours.

Even that level would be a drop in the ocean for a company that reported net sales of $57 billion in the third quarter. Analysts say margins on gold and silver offerings are likely slim.

Still, the gold rush is the latest sign that some consumers are still willing to choose a perceived safe investment amid widespread uncertainty in an otherwise robust economy.

“Gold has traditionally become a kind of fear trade,” said Lee Baker, founder of planning firm Apex Financial Services and president of AARP Georgia. “Economically, we are in quite good shape. “But this belies the emotional distress many people feel.”

That concern – fueled by everything from inflation to geopolitical tensions – helped spark a record surge in gold prices, which hit $2,450 an ounce in May, up from $2,100 in early March. Precious metals such as gold and silver are sometimes seen as “safe haven assets” that hedge against inflation and stock market volatility. But they may have their drawbacks.

“I haven’t had a single customer ask me about buying gold,” Baker admitted. But he added that those looking into it should ask themselves whether they want to monitor gold prices regularly enough to know when it’s time to sell.

It may be helpful to have a “specific goal for recognition,” he said. For example, “it might prompt you to say, ‘OK, we had an election. It’s ok. There were no riots throughout the country.”

Unlike other assets, precious metals do not generate cash flow in the form of profits or interest. Keeping gold or silver at home usually involves certain costs: it is worth insuring it and investing in a safe place, for example a safe.

In any case, Baker noted, “commodities are already part of the portfolio” of many other investments. “Investing in gold through an ETF or something like that is quite easy,” he said, referring to widely held exchange-traded funds.