One of the most common questions people ask is: “Is now a good time to buy gold in New Zealand?” We have written in our FREE eCourse (which you can access here) how the time to buy is on dips not when the gold price is reaching or close to reaching new highs.
So what is the gold price doing now? Has the priced dipped? If so, does that make it a good time to buy gold now? Is there anything else to consider? Read on to find out…
Table of Contents
- NZ Dollar Gold Price Has Corrected – Good Time to Buy?
- Other Indicators Showing Now is a Good Time to Buy Gold
- All These Factors Point to This Being A Good Time to Buy Gold
Estimated reading time: 8 minutes
NZ Dollar Gold Price Has Corrected – Good Time to Buy?
Below is a chart of gold priced in New Zealand Dollars.
NZD gold made a new all time high back in August 2020. So you may be thinking after such a strong rise, now can’t be a good time to buy can it?
However, since August the price has pulled back significantly. The gold price is now sitting well below the 50 day moving average (MA). In a bull market (which despite the correction we believe gold certainly looks to now be in), the price is likely to return to this level before too long.
So this looks like one of those “buy the dip” opportunities.
Longer Term – The Trend is Also Up
Also the “trend is our friend”. Longer term we can see the gold price has been rising steadily since 2014 (see the lower rising trend line in blue).
The shorter term chart above may make it seem like gold has fallen a long way. However zoom out to a longer 10 year chart and gold is clearly still in an uptrend.
The breakout in 2020 brought with it a new all time high. But after falling since last August, gold is now sitting just above the old high from 2011. This could be a possible area of consolidation with the old highs providing “support”. This means the price of gold wouldn’t move below this support line.
So there is a good chance of gold making a bottom here and turning higher.
Other Indicators Showing Now is a Good Time to Buy Gold
New Zealand Dollar is Close to Major Overhead Resistance
The US Dollar generally moves inversely to the (US Dollar denominated) gold price, while the NZD – as a preferred resource currency – generally also moves inversely to the US dollar. So, the exchange rate plays a major role in the NZ dollar gold price.
Recently the NZ Dollar has been denting the gold price in NZ Dollars. The Kiwi Dollar has been rising steadily since the Corona panic began in March 2020. So that has helped to suppress the NZ Dollar gold price.
But now the Kiwi is not far from the major overhead resistance level of 0.75. So it may struggle to get above this.
That’s not to say the Kiwi dollar will plummet from here. Perhaps we’ll just see a more sideways type trading range for a while. That might mean the NZ dollar won’t play such a big part in determining the local NZ gold price.
>> Read more on the New Zealand Dollar and why it may continue to weaken further: NZ Dollar Falls – Why Has the NZ Dollar Weakened and Where to Now?
Property and Stock Markets Have Recently Made All Time Highs
Real estate continues to set records. The median New Zealand house price set a new record high in February.
While the New Zealand share market has moved down from the all time high it set at the very start of 2021.
Gold is a “non-correlated asset”. So often performs better when other assets such as shares and real estate are doing badly.
That makes it a good time to buy when gold has been underperforming as it has been since August last year.
>> Learn more: Why Gold Bullion is Your Financial Insurance
Seasonality: Closing in on the Time of Year When Gold Often Rises
Gold often bottoms during the middle of the year. Then rises through to year end. So the recent pullback could make this time of the year a good time to buy gold, before what is often the next move higher.
>> Learn more:Does Gold Seasonality Affect the NZ Dollar Gold Price?
Futures Market Commitment of Traders Positions Indicate a Gold Bottom is Likely Close
Tracking the positions of traders in the futures market can also be useful when extremes occur. Sprott Money reports:
“As of last Tuesday, March 2, the Large Speculators in COMEX gold were NET long just 189,638 contracts. That’s their smallest NET position since the survey dated June 11, 2019—taken just days before the June 2019 FOMC meeting, where The Fed formally changed course and began cutting the fed funds rate. COMEX gold that day was trading near $1320 and then began a breakout charge to $1550 by August in a move that caught many by surprise.”
Why does this matter?
Because history shows the large speculators get it wrong at the extremes. As the numbers above show historically when they have their smallest positions is when gold is likely to bottom
Back to the Sprott report again:
“Next, we should check the monthly Bank Participation Report. This report summarizes the positions of the Banks that are most active in trading COMEX gold. With a reported NET position of 122,816 contracts short, this is the smallest combined short position since the report surveyed May 7, 2019.”
Again why should we care?
Because these banks are hedging other positions. So when they have very small short positions it means they don’t think the price is as likely to fall. Unlike the Speculators, at the extremes history shows the banks get it right.
As the Sprott report notes the current position is the smallest since early May 2019. In the 4 months following this, gold surged from US$1300 to US$1550.
All These Factors Point to This Being A Good Time to Buy Gold
If you buy gold in New Zealand dollars now we don’t think you’ll regret this in the years to come. Gold certainly looks to be in a new bull market.
Many experts recommend a minimum of 5-15% of your assets should be allocated to physical gold. We also discuss this in more detail in our Free eCourse.
>> Read more:When to Buy Gold or Silver: The Ultimate Guide
NOTE: You can go to our Gold Prices page to see the very latest Silver and Gold prices in both NZ and US Dollars along with their respective gold charts.
Or head to our online shop to buy gold today.
If you need more information on the process of how to buy gold see: How to Buy and Invest in Gold and Silver >>
Editor’s note: this blog post was published in August 2018. Last updated 12 March 2021 with new charts and updated numbers and reasons.