March 12 (Bloomberg) -- Gold futures in Mumbai are set to decline within a month to levels last traded in May, according to technical analysis by Angel Commodities Broking Pvt.
The relative-strength index signals that futures on the Multi Commodity Exchange of India will probably drop to a support level of 28,700 rupees per 10 grams ($1,645.03 an ounce), a senior technical analyst Dhanik Shah said. That would be the lowest intraday level since May 18.
The RSI on the monthly chart has steadily declined from the overbought level of 70 since the start of the year, and is still far from the oversold area of 30, said Shah. The contract for April delivery traded at 29,351 rupees today, and the reading on the RSI index was 63.41. Futures have lost 4.9 percent in 2013 after gaining for eight consecutive years.
The RSI measures the velocity of price changes to identify overbought or oversold conditions and turning points. A sell signal is usually triggered when the indicator rises past 70. An RSI value of 30 or less indicates it may be time to buy.
Futures could find support at about 28,700 rupees because it’s the 50 percent Fibonacci retracement level of the move from a low of 24,992 rupees in September 2011 to the all-time high of 32,464 rupees in November 2012, Shah said. Stronger support is expected at the 61.8 percent retracement level of about 27,800 rupees, he said.
Fibonacci studies are based on the theory that prices rise or fall by certain percentages after reaching a high or low.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.
--Editors: Ovais Subhani, Thomas Kutty Abraham