Gold futures in Mumbai are poised to extend declines to the lowest level since August 2011 as a falling trend channel signals further losses, according to a technical analysis by Motilal Oswal Commodity Broker Pvt.
Futures may drop 8 percent to 24,000 rupees ($438) per 10 grams on the Multi Commodity Exchange of India Ltd. in the next month, said Kishore Narne, head of commodity and currency at the Mumbai-based brokerage. That would be the lowest intraday price since Aug. 4, 2011.
Bullion in London entered a bear market last month and is off to its worst start to the year since 1982, losing 18 percent, as investors sold the metal in favor of riskier assets on speculation that the global economy was recovering. Futures have lost 20 percent in Mumbai since reaching an all-time high of 32,464 rupees in November. The contract for June delivery fell 0.3 percent to 26,047 rupees today.
“The falling channel has been on for a long time and once the channel breaks, it repeats exactly on the bottom side,” Narne said in an interview. “There is a range shift that has happened and we are now into the lower range.”
A falling channel is a continuation pattern where prices show bearish signals along a channel marked by two parallel lines. The falling channel continues until the prices move to break through the upper or lower end of the channel accompanied by high volume. In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes.