By John McDonald
Black Friday is the name for the Friday after Thanksgiving when retailers historically have relied on holiday shoppers to boost their margins right into “the black”. However, the name used to mean something different (and terrible) for gold investors, and that is good news for portfolios holding the yellow metal today.
On September 24, 1869, the bottom fell out of the price of gold. Two financiers name Jay Gould and James Fisk had used insider knowledge about sitting president Ulysses S. Grant’s policies on selling off federal gold to manipulate the market.
When Grant found out, he responded to their attempt to corner the gold market by selling off $4 million in government gold and buying $4 million in government bonds.
Not surprisingly, flooding the market that way created a panic in the securities market and sent shock waves through both the U.S. and European economies.
However, Grant’s move did ultimately prevent a national depression, although many historians believe that he knew far too much about his associates’ corrupt practices to be fully innocent of the scheme.
In present-day context, of course, Black Friday has very little to do, directly, with the price of gold.
In fact, when Black Friday goes well for retailers (as it ultimately did this year despite something of a slow start), the dollar firms up and gold investors may snag a “Black Friday deal” of their own on the yellow metal.
This past Black Friday sales at physical stores increased 4.2 percent compared to 2018 according to Fiserv, Inc. Online sales reached $7.4 billion, which is the second largest online shopping day recorded behind only Cyber Monday 2018.
Analysts predict Cyber Monday 2019 sales could reach $9.4 billion, which would be an 18.9 percent increase from last year.
What does this all mean for gold values?
At present, those prices are falling slightly in response to strong consumer sentiment and subsequent spending, both of which are bolstering the dollar.
Positive noises from both China and the U.S. about ongoing trade tensions are also keeping gold prices suppressed.
Why is this a good thing for investors holding the yellow metal? Because, put simply, this trend is unlikely to last.
Analysts still agree that gold is likely to break its $1,500 ceiling sometime in 2020. Furthermore, as long as trade tensions remain unresolved the metal’s value will likely spike again as we near mid-December, when certain tariffs are currently scheduled on Chinese goods.
In fact, according to Dutch multinational banking group ING, the new floor for gold in 2020 will likely be about $1,450. With today’s values just slightly higher than that, the time to get a good deal on this safe-haven investment is definitely this holiday season.
“Looking to 2020…uncertainty around trade talks and global growth are likely to remain key drivers,” said ING head of commodities strategy Warren Patterson and ING senior commodities strategist in the group’s 2020 Commodities Outlook.
The same report indicates ING expects gold to average $1,500 an ounce over the course of Q1 2020 before falling slightly, then rising back to just under $1,500 in Q4.
The analysts added, “If the U.S. Fed turns increasingly more dovish, this only provides further upside.”