Gold Miners Bullish Percent Index

The Gold Miners Bullish Percent Index ($BPGDM) is a gauge of overbought and oversold conditions for the gold mining sector. It is a breadth indicator based on the number of stocks with Point & Figure buy signals (a Point & Figure chart emphasizes strong moves while ignoring small ones) within this index.

The Gold Miners Bullish Percent Index's range varies between 0 and 100. Generally, a reading below 30 indicates oversold conditions in the gold mining stocks sector, and a reading above 70 indicates overbought conditions. This indicator is used as a tool to decide when to buy or sell gold mining stocks, but since gold stocks very often move in tune with gold or silver, it can be a useful tool when determining the direction of the entire precious metals sector. The index can be used in conjunction with a gold price chart, or multiple other tools, to watch for additional confirmations of a trend.

How to apply the Gold Miners Bullish Percent Index in gold trading?

One of the best ways to do the above is to look for oversold/overbought conditions accompanied by additional confirmations of a trend like the Relative Strength Index and Williams %R indicator. Both indicators can provide overbought and oversold signals independently, but based on our research the signals are most reliable when both indicators based on the $BPGDM (the symbol for the Gold Mining Bullish Percent Index) confirm each other. You can see an example on the chart below.

Gold Mining Bullish Percent Index

Interestingly, when a “buy” signal is flashed, it doesn’t imply that a move higher will be seen right away. It is a strong indication that a move higher will follow in the coming weeks, but not necessarily right away. In fact, it was most often the case that a move in the market was seen with a delay. This characteristic is very useful because such early signals give one time to prepare for the trade and to look for additional short-term confirmations before entering the trade.

Another way to use the Gold Miners Bullish Percent Index is to apply a short-term moving average to it (for instance, a 5-, 8- or 10-day one) and view the index’s breakout above this moving average as a buy signal and a breakdown below this moving average as a sell signal. In this case, we would get very short-term signals.

You can see how we applied the first of the mentioned approaches in one of our articles: Is the Correction in the Precious Metals Sector Over?

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