After rising sharply from March to August, silver has fallen sharply in the last few months. As a result, we now have what looks like an excellent silver buy zone. Here’s a look at a few silver charts showing why this might be…
Table of Contents
- The Big Picture NZD Silver: 4 Major Trends Since 2005
- Zoom In: Daily Chart From 2015 to 2018
- Weekly NZD Silver Chart
- Monthly NZD Silver Chart
- Contrarian Indicators That Silver Looks to be in an Excellent Buy Zone
- A Weakening NZ Dollar May Also Give NZD Silver a Boost
- No Guarantees
The Big Picture NZD Silver: 4 Major Trends Since 2005
Looking back to 2008, silver has seen 4 major trends.
- In the lead up to, and then also just following the financial crisis, silver in New Zealand dollars rose sharply.
- But then silver fell from 2011 through to 2015.
- Since 2015 silver had been quietly moving higher without many people noticing.
- Then in 2019 the uptrend got steeper. Following the sharp drop in March caused by the COVID panic, silver rose sharply through to August reaching NZ$45. But has pulled back sharply since then to as low as NZ$31.
Zoom In: Daily Chart From 2015 to 2018
Back in November 2018 we posted the below daily chart of silver in NZ Dollars.
Silver has dipped quite sharply in the past couple of weeks. It is now at a new low for 2018 just above $20.
NZD silver is also pretty much back down to the rising trend line dating back to the late 2014 lows.
On top of this, the RSI overbought/oversold indicator is now well into oversold region below 30. If you look back at previous times the RSI was below 30, you’ll notice this is where we often see lows in price reached.
See this for more on understanding technical analysis terms: Gold and Silver Technical Analysis: The Ultimate Beginners Guide >>
How Have Things Played Out Since late 2018?
So what has happened with silver since late 2018?
Here’s the same chart with the last couple of years also included. November 2018 was indeed a very good time to be buying silver. As noted earlier, silver did of course spike briefly lower in March 2020. But it then rapidly rose through to the August high.
What About Right Now?
Silver in NZ dollars has been correcting since August. It has recently bounced up off the 200 day moving average (MA) (see the thin wiggly red line in the chart above).
In technical analysis the price being above the 200 day MA is often considered the marker of a bull market or uptrend. So buying as the price hits or bounces off the 200 day MA is often a very good time to buy.
Just as it did in late 2018, the Relative Strength Index (RSI) also recently touched oversold (30). See the top of the above chart. If we look back we can see that historically other times the RSI has hit 30 have coincided with bottoms in the price.
Weekly NZD Silver Chart
Next up, below we have a weekly price chart. This plots the closing price of silver every Friday and is helpful in smoothing out the day to day movements. We can see that on a weekly price basis, NZD silver just bounced up off the 50 day moving average. So silver may well have bottomed out there.
Monthly NZD Silver Chart
Finally we have a monthly NZD silver chart. This monthly chart plots the closing price of silver at the end of each month (December shows month to date closing price). The monthly chart really smooths out the short term noise in the silver price. We can see that on a monthly basis NZD silver is a bit more neutral than on the daily or weekly chart.
So you could make the argument that silver still has further to fall. However our thinking is that late 2018 (when we previously called an excellent buy zone for silver), was a change in trend for silver. From a very gentle subtle rise to a stronger rising market.
Therefore our best guess is that silver has recently bottomed out in this stronger rising trend.
Contrarian Indicators That Silver Looks to be in an Excellent Buy Zone
We also have a couple of contrarian indicators currently pointing to a bottom in silver in NZ Dollars.
At present, there is much lower buying interest in silver (and gold for that matter), compared to recent months. Our experience has been that bottoms often happen when very few people are interested in buying. Rather most people are worried the price will fall further.
Also our website visitors are down over the past few weeks compared to what they have been for much of 2020. This is another indicator of lessening interest in precious metals. Again a good indicator that a bottom may have taken place.
So the above charts seem to be indicating silver is in an excellent buy zone right now. But so are our contrarian indicators.
A Weakening NZ Dollar May Also Give NZD Silver a Boost
Also the New Zealand Dollar may well be due to turn lower. The Kiwi has risen sharply from March. After getting as low as 0.56 it is currently just above 0.70.
The RSI (blue circle) is still in overbought territory (above 0.70). So if the NZ dollar weakens down to say the 50 day moving average at 0.68 or even the 200 day MA at 0.65, that will give local silver prices a boost higher too.
Of course the above is all just our best guess. there are no guarantees when it comes to silver!
But be careful about trying to time an exact bottom in silver. This can lead to paralysis by analysis. Trying to second guess whether the price will go lower from here. Thus, leaving you sitting on the sideline as the price moves higher.
If you’ve been looking to buy silver this is likely to be a pretty good area to get a foot hold. If in doubt consider taking an initial position, but keeping some funds in hand for another purchase of silver if the price fell further.
To learn more about when to buy gold or silver check out this article: When to Buy Gold or Silver: The Ultimate Guide
Editors Note: This post was originally published on 24 July 2018. Updated 13 November 2018 and again on 14 December 2020 to include latest charts.