by Turd Ferguson, TF Metals Report:
Costco is selling gold and silver on line. Are they anticipating future consumer trends? Or are they getting Sound and Real money into their customer’s hands due to issues with the dollar and CBDCs?
Which one is it?
Something totally new? A marketing test run? A means to bring in new customers? Satisfying a survey that said some people want to buy precious metals? Or is it something else?
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All of the above?
Costco is acutely tuned to their members and daily buying habits as they dial in products, pricing and specials as they work off hourly and daily trends. If their 2 hour ‘Hit and Git’ window for ASE is any indicator they are doing one heck of a Beta Test for ASE and AGE. Costco has already been selling Canadian Maples.
RENOZEP, our editor, saw that offering too. Much like the ASE, the offer said “Out of stock’ As a guess, these Maples might only be offered in Canada. The real game changer will be the day they start selling ordinary .999 silver rounds and the original silver coins that some call junk bullion.
Will Costco see $5,000,000,000 in gold and silver over the next 2 years? That would be hard call since 3 other major bullion banks are doing big business, maybe low 10 figures of collective volume in a year.
How much more could Costco offer when buyers like you or me see that Costco ASE is around $4 over spot plus 2% rebate on the card and no credit card swipe fee. Will members pile on? That’s the billion dollar question.
The race for bullion sales is now well engaged by bullion banks, local coin dealers and other internet precious metal sellers. Could Costco take the lead with a 5% price spread given they charge no swipe fees on bullion buys while offering a 2% rebate on their Costco credit card? That 5% is a big differential.
If their bullion logistics warehouse outside Costco HQ in Kirkland WA is working effectively and they can get enough inventory to satisfy all buyers on a 24/7 basis they could become a player. If they slip up and have serious fulfillment problems that model could crash and hurt their reputation.
At breakfast RENOZEP gave us a personal inspection of the shipping/delivery and packaging of a single tube of American Silver eagles. It cost $540 ‘all in’ with free shipping and insurance plus fast delivery that was paid for by a Costco card. Since delivery took 4 days we were of the opinion that the delivery system was effective.
None of us could tell if the ASE was anything more than a 2024 20-coin tube of inventory shipped by any bullion bank from warehoused inventory. Note– THE TUBE HAD THE USUAL SEAL ACROSS THE TOP PUT ON AT THE MINT –BUT HAD AN ADDITIONAL FANCY STICKER ON ONE SIDE WITH THE PICTURE OF AN EAGLE AND MORE INFO DETAILING THE CONTENTS.
Costco is nothing without their good reputation. All bullion dealers must work overtime to make sure their reputations are spotless. That takes big money to maintain, as anyone can see from SD Bullion’s video of how their huge vault in Michigan operated.
Want to See Inside SD Bullion Vaults? Watch This Jaw Dropping Video
Can Costco assure buyers of the same service? Time will tell. A Bullion Bank’s growing pains can be daunting and complex. Without a major vaulting complex Costco could have trouble processing and shipping $1 billion in silver and gold.
How does Costco deal with counterfeit coins? That problem is ubiquitous in the industry. How does Costco train employees who are dedicated to the job at hand? Those matters must absolutely be dealt with.
Time will tell.
Silver sales could be a category killer if more people become aware that silver is the poor man’s gold, offering a secure redoubt or hedge against predatory inflation, grabby tax authorities and greedy bankers. Costco might the first big box retailer into this space but RENOZEP believes that Walmart was offering bullion on a small scale before Costco started. This almost went unnoticed by the PM blogosphere.
Is there enough room for Walmart, Sam’s Club or other major retailer to do any significant PM sales? ASEs are minted in limited numbers so a wholesale feeding frenzy for mint coins would quickly show supply chain troubles. If we see weeks for delivery or even speculation that the physical won’t be delivered that’s when these systems start to show real problems and some dealers have to step back.
Bullion dealers generally have 3% for swipe fees. That fee trend could grow substantially if people decide they have to go ‘ALL IN’ and do it fast. Small purchases are easy peazy if a retail customer wants to dip a toe in a single tube of sealed ASEs. $540 for a single tube is a healthy sum for families on a budget. I’ve used my Costco card at SD Bullion several times for snapshot low price deals in the last few years. Swipe fees might be moot for the small buyer to get into the silver market with credit card fees; a small cost for a quick buy.
I get a decent rebate from Costco but I would not buy ASEs with Costco as my loyalty supports SD Bullion and a local dealer despite a nominal price difference and the credit card rebate. There are two other bullion dealers who offer good pricing as well as Kinesis for digital purchases. Some prefer local coin stores for the convenience of buying and selling plus anonymity. Trading with local or internet bullion dealers supports small and medium sized business everywhere so there are many choices.
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