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Costco now sells up to $200 million a month in gold and silver

Why are gold prices suddenly rising?
Why are gold prices suddenly hitting record highs? 04:48

Shoppers are heading to Costco for more than just budget-friendly hot dogs. 

The warehouse club has seen a spike in sales ever since it began selling 1-ounce bars of 24-karat gold last September. With the gold bullion selling out faster than the store could replenish its stock, the discount giant in January added silver coins to its offerings of precious metals. 

According to a recent estimate from Wells Fargo, the members-only retailer now sells $100 million to $200 million worth of gold and silver a month. The burgeoning business comes as the price of gold is reaching new heights.  

Sales have climbed partly because of "Costco's aggressive pricing and high level of customer trust," Edward Kelly, a Wells Fargo equity analyst, said in a research note. "The accelerating frequency of Reddit posts, quick online sell-outs of product, and Costco's robust monthly eCommerce sales suggests a sharp uptick in momentum since the launch."

Costco didn't immediately reply to a request for comment on Wednesday. 

Are gold bars a good investment?: On Your Side 03:00

Online buzz explains part of why Costco's gold is flying out the door. But the shiny metal is also a traditional hedge against inflation, which remains stubbornly persistent, as well as stock market volatility. 

Adding to its current allure, gold prices have risen over the past year, hitting several milestones in the last few weeks alone — climbing from a then record high of $2,160 per ounce in early March to today's price of $2,353.15. The value of gold has grown 14.5% since January — higher than any of the major indices on the New York Stock Exchange. Gold prices are likely to stay flat over the next couple of months, experts predict.

Costco sells two types of gold bars: a 1-ounce PAMP Suisse Lady Fortuna Veriscan bar, which bears the imprint of a silhouette of the goddess of fortune with a cornucopia, and a 1-ounce bar from South Africa's Rand Refinery, stamped with an elephant design. It also sells 1-ounce Maple Leaf silver coins at $650 for a 25-coin pack. 

Gold bars at Costco are selling for about 2% above spot price, according to Wells Fargo. That means while Costco is happy to offer the metals to consumers, it's not generating by way of earnings. 

"Pricing at that level and shipping costs suggests it's a very low-profit business at best," Kelly wrote.

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