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 in 2022? 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
- Property and Stock Markets Have Turned Down From All Time Highs
- Seasonality: Closing in on the Time of Year When Gold Often Rises
- Futures Market Commitment of Traders Positions Indicate a Gold Bottom is Likely Close
- Next Wave Up May Have Begun
- All These Factors Point to This Being A Good Time to Buy Gold
Estimated reading time: 9 minutes
NZ Dollar Gold Price Has Corrected – Good Time to Buy?
Below is a chart of gold priced in New Zealand Dollars.
Earlier in 2022, NZD gold got close to the all time high from 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 March the price has pulled back. Recently getting as low as $2700 per ounce. From there the gold price bounced back and is now sitting just above the 50 day moving average (MA). It would not be a surprise to see gold dip back down again. Maybe to around the 200 day moving average (MA) just below $2800.
So that could be 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 only been rising for just over a year. However zoom out to a longer 10 year chart and gold is clearly in a long term uptrend.
The breakout in 2020 brought with it a new all time high. From August 2020 through to March 2021 gold underwent a steep correction. From there through until March of 2022 gold staged a comeback. But since then gold has been in a corrective phase. It’s possible that phase is now over and the next up wave may be starting. This would eventually see gold once again challenge the all time high near NZ$3200.
Other Indicators Showing Now is a Good Time to Buy Gold
Property and Stock Markets Have Turned Down From All Time Highs
Record low interest rates and currency printing have stoked record high prices in NZ Real estate. But prices have been falling since the median New Zealand house price topped out in November 2021.
While the New Zealand share market has moved down from the all time high it set at the very start of 2021. The NZX50 has been rising since June. However there is a good chance this could just be a bounce back in what turns out to be a longer term downtrend.
Gold is a “non-correlated asset”. So often performs better when other assets such as shares and real estate are doing badly. As it did from 2007 to 2012, when NZ housing was down or flat at best.
That makes it a good time to buy when gold has been underperforming as it has been since August 2020. For more on gold vs property see: NZ Housing to Gold Ratio
>> 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. Just last week we reported on this:
Managed Money Traders Current Position in Gold Futures
Currently in gold the Managed Money are short (which is very unusual in itself). But not only that, the Managed Money are also at all time record high short levels. The chart below is dated 22 July and the short position has now extended out to 111,309 for the most recent data published 26 July 2022. So managed money short positioning has only been higher than this on 3 occasions since 2007. This position is 3.6 times higher than the median long term position.
Why is this important?
Because the Managed Money (hedge funds and the like) are usually wrong at the extremes. That is, historically their overall long position is usually high at tops in silver or gold (they’re all betting the price will rise). And usually low at bottoms (they’re betting the price will fall further). But currently they are more extreme than that and their overall positions are actually net short. With the gold and silver price having already corrected significantly since 2020.
Commercial Traders and Bullion Banks Current Position in Gold Futures
Conversely the Commercial traders and bullion banks net short position in gold is currently very low historically. So they think prices are likely to rise from here. These producers/end users of gold are usually right at the extremes. The Commercials/bullion banks usually have a higher net short position when prices are peaking as they are hedging themselves against the price falling.
Currently these hedgers are doing just the opposite. They are now only around 100,000 contracts net short. The chart below shows gold hedgers are once again approaching levels we saw at key turns in the gold price in 2015 and 2018/19. (Note: the hedgers position in the chart below is usually negative – indicating they are long – so hence when the blue line is higher, this indicates a lower short position.)
So the “smart money” in gold is betting on the price rising. Bear in mind these are the industry players who usually hedge their exposure to physical gold by being short gold. This is a very significant change.
Next Wave Up May Have Begun
Below is a long term gold chart with what are known as Elliot waves drawn on it.
We actually drew these green lines on the chart back in the first quarter of this year, when we thought we were overdue for a correction. That proved to be a pretty good guess. With a correction arriving soon after.
Our guess is that the down wave has now come to an end. And perhaps we are now in the early stages of the next wave v up.
For a quick intro (or refresher) on Elliott wave theory, it contains 5 major waves. Up, down, up, down, up. Then 3 correction waves, down, up, down. Then within these major waves up are also 5 minor waves. So it is the minor wave iv down that we think may have been completed. So wave v up will likely take gold to new all time highs.
You can read a whole lot more about Elliott wave theory at this very well written stockcharts post.
Here is their example of a bullish cycle.
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.