The retailer Costco is surprised by the popularity of the gold plates that it occasionally puts on sale on its transactional website.
“When we upload them to the site, they usually disappear within a few hours,” Costco Chief Financial Officer Richard Galanti said in a conference call with financial analysts. In fact, sales of precious metals are an exception among expensive products whose sales generally weakened during the last quarter.
The information was widely reported by the financial media on Thursday.
In response to this high demand, Costco is limiting purchases to two one-ounce wafers of pure gold per member.
SCREENSHOT OF COSTCO.CA WEBSITE
On Friday, the sale price of a bar of gold was $2,670 per ounce, plus $25 for delivery costs by Canada Post.
Walmart is another retailer that allows its customers to purchase ounces of gold online. In the latter case, the sale is made through a third party, we were able to observe during testing.
Is the popularity of gold among Costco members experienced elsewhere? According to the owner of Monnaie Collection Royale in Shawinigan, André Goulet, demand for physical gold remains strong since the pandemic, but without experiencing a notable increase in the last year.
Mr. Goulet is an authorized dealer of the Royal Canadian Mint. It only sells Crown corporation investment products, including the famous 99.99% pure gold maple leaves.
Furthermore, he is not at all worried about competition from Costco. “Try finding an ounce of gold on Costco, good luck!” », he says.
On Friday, its selling price was $2,670 per ounce, plus $25 for Canada Post delivery costs.
Low price and diversification
The price of gold has fallen since the end of August due to the rise in long-term bond rates in the United States and the strength of the greenback. A higher 5-year bond rate has the effect of increasing the opportunity cost of holding gold since it, as everyone knows, does not generate income. In addition, since gold is sold in US dollars, the rise in this currency pushes down the price per ounce. It sold for US$1,850 on Friday afternoon.
Investing a small part of your assets in gold is a recognized way to diversify your portfolio. The precious metal acts as a wealth insurance policy. Weakly correlated with stocks, gold often does well when the economy and financial markets derail. As such, strategist François Trahan predicts a decline in equity markets of 35% within 18 months1.
Let’s take 2022 as an example. Stocks and bonds delivered negative returns, while gold appreciated 6.9% in Canadian dollars. Since 1er January 2023, its price continued to advance, by 1.5%.
“Personally, I didn’t know that Costco sold gold plates,” says Hugo Bonenfant, portfolio manager at Desjardins Securities, candidly. He is one of the rare portfolio managers to recommend holding precious metals to his clients, while respecting their investor profile and their level of risk tolerance.
He has not sensed more interest in holding gold in recent months. “There are still few people who are interested in precious metals. The stock market has still done well since the start of 2023. This generally leads to less interest in gold,” he explains.
The most recent official figures from the Royal Canadian Mint seem to corroborate his words. The number of ounces of refined gold fell by 18% in the second quarter of 2023 compared to the same period in 2022. For the first half of the year, the decline is 6%.
However, the tide could soon turn. According to a Gallup poll published last May, more than a quarter of American investors (26%) believed that gold was the best long-term investment, the highest percentage obtained on this question since 2012. The popularity of gold has this year even surpassed that of stocks (which receive the support of 24% of investors) in this regard, a first since 2013.
“Gold tends to become popular when confidence levels in real estate and stocks are declining. This typically happens during times of economic recession or uncertainty, as happened around the time of the Great Recession, and it still happens today,” the polling firm wrote in its press release from last May.