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The gold sector is gearing up for a rally.
That’s a contrary opinion for sure. Most folks have soured on the gold sector, since the action over the past few months has been so poor.
The Gold Bugs Index (HUI) peaked at 960 in late-February. It closed last Friday at 675. That’s a 30% decline in just over three months. The index has given up all the gains from the blistering rally that started the year. It is now underwater for 2026.
This is, however, the setup from which gold stock rallies begin. The Bullish Percent Index for the gold sector (BPGDM) is on the verge of generating a buy signal. Take a look…
The BPGDM measures the percentage of gold stocks that are trading in a bullish technical formation. It’s basically a gauge of overbought and oversold conditions.
Since it’s measured as a percentage, a bullish percent index can only reach as high as 100% or fall as low as zero.
Typically, a sector is extremely overbought when its bullish percent index rallies above 80%. It’s extremely oversold when it drops below 30%.
Trading signals are generated when the index reaches extreme levels and then reverses.
The blue arrows on the chart point to the previous buy signals so far in 2026.
Here’s how the Gold Bugs Index performed after each of those signals…
HUI rallied 20% in three weeks after the BPGDM buy signal in March. It rallied 12% in one week following the May buy signal.
To be clear… those were only short-term rallies. But, they were rallies that generated big gains, fast, for traders who were quick to act.
The BPGDM closed yesterday below 8. It is deep into oversold territory. It will generate a new buy signal when it turns higher – which could happen any day. Short term traders should step up and buy gold stocks once that happens.
There’s an excellent chance the gold sector will be higher a few weeks from now than where it is today.
Best regards and good trading,
Jeff Clark
Editor, Market Minute