The Gold Miners Bullish Percent Index ($BPGDM) currently shows a reading of 6.90 on the weekly chart. This is the lowest I have ever seen this index at, pointing at extreme bearish sentiment for gold (and therefore silver) mining stocks.
What is the Gold Miners Bullish Percent Index ($BPGDM)?
The Gold Miners Bullish Percent Index ($BPGDM) shows whether gold mining stocks are oversold or overbought. Values of under 30 are to be considered “oversold”, and values above 70 are to be considered “overbought”.
It is not a perfect metric. The fact that the reading currently shows extreme oversold (extreme fear) levels, does not mean gold stocks will shoot up from here. It simply means that the market is not looking to buy gold and silver stocks right now.
More specifically, the indicator is based on the number of gold mining stocks that show a “buy signal” on their Point & Figure charts.
Gold and silver stocks tend to move together, so when gold mining stocks are at extreme oversold levels, it is assume that silver stocks are oversold, too.
However, gold and silver stocks are under no obligations to respect this index. They do usually follow the gold price, though. With rising interest rates, in combination with worries about a “massive recession”, investors have fled just about anything in the markets, including gold.
If such a “massive recession” comes along, gold and silver stocks will not be spared during an even broader deleveraging event, and they could fall even more despite the fact that the BPGDM index is showing extreme oversold levels.
