Why are Costco's gold bars selling out?

Over the past year, Costco, the warehouse retail store known for its bulk groceries and household essentials, has become an unlikely hotspot for precious metal enthusiasts. The retail giant first made waves in late 2023 when it began offering 1-ounce gold bars to online shoppers, a move that quickly garnered immense popularity. The demand was so overwhelming, in fact, that Costco had trouble keeping the gold bars in stock, leaving many hopeful buyers empty-handed.

Costco has since expanded its precious metals offerings and now offers gold bars for sale at select warehouse locations — and has also added platinum to the mix. But while you can purchase Costco's gold bars both online and in person these days, the fervor for the shiny commodities shows no signs of abating. Approximately 77% of Costco outlets stocking gold bullion bars reported depleted inventories by early October, according to a recent Bloomberg survey, despite having received fresh shipments. 

This persistent shortage begs the question: What's driving this modern-day gold rush? That's what we'll explore below.

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Why are Costco's gold bars selling out?

Some of the key factors behind the high demand for gold include:

Investors are capitalizing on gold's price trajectory

One of the primary reasons for the growing demand for physical gold is its remarkable price performance so far this year. Gold began the year priced at $2,063.73 per ounce, and by October, gold's price had skyrocketed past $2,650 per ounce, marking an impressive increase of nearly 30% so far in 2024. This rapid appreciation has caught the attention of both seasoned investors and newcomers and is likely to continue to do so.

After all, many experts are still bullish on gold's prospects even after this year's explosive price growth, with some predicting that the $3,000 per ounce milestone could be within reach soon. The combination of impressive year-to-date returns and optimistic forecasts has created a perfect storm of interest in gold as an investment vehicle.

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The stock market is experiencing some volatility

While the stock market has largely performed well this year, there have been pockets of volatility that have unnerved investors. Financial markets can be fickle, with stock values rising or plummeting in response to a single piece of economic news or political development. These unpredictable swings can leave even the most well-diversified portfolios vulnerable to sharp losses. So, investors who are wary of the stock market's unpredictable nature will often turn to gold as a hedge against potential downturns.

Gold is renowned for its ability to retain value in times of financial market distress. Historically, gold prices tend to rise when stocks fall because of the uptick in demand as investors seek out safer assets. This inverse relationship with equities makes gold an attractive option for those looking to reduce their exposure to stock market fluctuations. And with ongoing concerns about potential corrections or drops in the stock market, the demand for gold has surged as investors seek to stabilize their portfolios.

Portfolio diversification is still important

Portfolio diversification remains a key strategy for protecting investments, which is also likely helping to drive some of the sustained demand for gold bars right now. Precious metals like gold play a crucial role in safeguarding wealth as their low correlation to other financial assets means they tend to move independently of stocks and bonds. So, in times of economic stress, gold is used as a counterbalance, helping to protect against losses in other areas.

By adding gold in their portfolios, investors can spread risk and increase their chances of preserving wealth, especially during economic downturns. This diversification has made gold an attractive investment for those looking to safeguard their wealth, even if they aren't solely focused on gold's potential for price appreciation. 

Preparing for another round of inflation is also crucial

While inflation has cooled in recent months and interest rates are starting to stabilize, many investors are still concerned about the long-term outlook for inflation. Even when inflation rates dip, the threat of rising prices remains, especially since inflation tends to be cyclical. So, some of the sustained demand for gold could be driven by investors who are preparing for another round of inflation in the future, as gold has historically been viewed as a hedge against rising prices.

Gold holds its value better than most other assets during inflationary periods because its purchasing power tends to remain stable while the value of paper currency declines. As investors look for ways to protect their wealth from the eroding effects of inflation, gold has become a go-to option. And gold bars, in particular, provide a tangible way for investors to safeguard their money against the unpredictable future of inflation.

The bottom line

The ongoing demand for gold bars is being driven by numerous factors, from investors capitalizing on gold's impressive price gains to hedging against stock market volatility, diversifying their portfolios and preparing for potential inflationary pressures. And, while it's hard to predict the market, the sustained high prices coupled with analysts' expectations of further price growth indicate the likelihood that investors will continue to find compelling reasons to add physical gold to their assets. As long as these economic factors persist, it's likely that gold, and gold bars in particular, will continue to shine brightly in the eyes of investors, keeping demand high and inventories low.