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Why you should take profits on the red-hot gold trade: Strategist
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Some shine is due to come off the red-hot gold trade.
Gold ( GC=F ) has been one of the best-performing assets this year.
The price of the yellow metal has soared 27% year to date to about $2,600 an ounce. Prices hit a fresh record high of $2,694 an ounce on Sept. 26. By comparison, the S&P 500 ( ^GSPC ) is up 20% on the year.
The SPDR Gold Shares GLD ( GLD ) ETF has risen about 27% on the year too.
Plenty of factors have contributed to the surge in demand, such as geopolitical and economic instability, which tends to trigger demand for hard assets such as gold.
Pros point to US dollar weakness and the Fed's new interest rate cutting bias as further support to gold prices.
However, one of the most fascinating potential contributors to the surge in gold interest this time has been the beloved warehouse club giant Costco ( COST ).
While it is a known bastion where consumers can snap up a year’s worth of items like paper goods, trash bags, and food and household furnishings, Costco began selling 1-ounce gold bars to its members last fall .
The product has seemingly performed well since its introduction as consumers look for the easiest way to gain exposure to an asset appreciating in value.
On a recent earnings call, Costco CFO Gary Millerchip said “continued strength in [gold] bullion was a meaningful tailwind” to the quarter and that sales had risen by “double digits.”
Analysts for Wells Fargo recently estimated Costco is selling between $100 million and $200 million each month in gold bars. It could be selling more, but Costco gold bars are limited to five per member and are only available to warehouse club members.
Gold is doing so well for Costco that the company is now expanding into platinum bars .
Traditionally, physical gold demand has been driven by key financial players such as central banks, not the likes of Costco. "We’re talking China, Saudi Arabia, Russia,” Rooney Vera said. "But lately, demand has grown to include price-insensitive buyers who are becoming less prone to buying Treasurys and more prone to buying gold," she said.
Although StoneX hasn’t been around quite as long as the great gold rushes of the mid- to late 1800s, the legacy investment firm still has its place in finance and marked its milestone 100th birthday this year. A century of observing what makes investors tick comes in handy when looking at gold’s meteoric rise over this past year.
Brian Sozzi fields insight-filled conversations and chats with the biggest names in business and markets on Opening Bid . You can find more episodes on our video hub or watch on your preferred streaming service .