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Why Gold May Not See 2011 Price Levels Again

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(Kitco News) - Gold prices have been trading range-bound and whether or not prices break out depend mainly on how long the trade war with China lasts, this according to Phil Streible, senior market strategist of RJO Futures.

“I think that if we resolve [the trade agreement] at the next meeting, we could see interest rates start to actually poke back up again, the U.S. economy could get heated up again, and we might have this hawkish tone, but if we have it dragged out over a period of well over another year, we could see that really wane on the economy and that’s where your interest rate cuts come in,” Streible told Kitco News.

He said that it’s only a matter of time before gold prices break out from the 100-day to 200-day moving average range, but whether or not prices move up or down depends on several other key macroeconomic forces.

“We’ll definitely break out of it at some point, the question is whether we break out to the upside or the downside and I think a lot of that has to do with the trade agreement, also geopolitical issues with Iran and then also how the Fed reacts with their statements,” he said.

He added that short-selling pressure has also weighed down on gold as traders move their capital to other safe haven assets.

Longer term, if gold prices were to retest 2011 highs, several macroeconomic conditions need to change, Streible noted.

“You’re going to need the dollar to come back quite a bit, you’re going to need to see interest rates cut in order for that to happen, and increased geopolitical risk, then maybe you’ll get that breakout, but there are so many levels of resistance points,” he said.

According to Streible, gold still needs to break key resistance levels before sustained upside momentum can be expected, and these levels are $1,300, $1,320, and $1,350 an ounce.

Spot gold last traded at $1,283.40 on Friday as of 12:00 pmEST, relatively unchanged since Thursday’s close.

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