Gold Futures in India to Extend Rally on RSI: Technical Analysis

Gold futures in India, set for the best monthly gain in almost two years, may extend the rally to the highest level since April in the next two months, according to technical analysis by Angel Commodities Broking Pvt.

The 14-day relative-strength index of August-delivery contract on the Multi Commodity Exchange of India Ltd. is 66 and should it reach 70, prices would climb to 28,100 rupees ($473) per 10 grams, the highest close since April 13, said Anuj Gupta, associate vice president at the Mumbai-based brokerage. Prices may decline thereafter, he said in an e-mailed interview.

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. The RSI of the August contract has been climbing from a level of 11 on April 15 and is yet to reach the overbought of 70, Gupta said.

“Gold will trade with a positive bias in the next one to two months because the price has bounced back and seen substantial volumes at lower levels, which shows accumulation in the precious metal,” Gupta said.

Futures have rallied 7.6 percent this month in Mumbai, set for the steepest gain since August 2011 and the first monthly advance in 11 months. The contract for delivery in August traded 0.1 percent higher at 27,610 rupees per 10 grams at 10:13 a.m. in Mumbai today.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

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