FX.co ★ Gold has chance to rally

Thursday was the best day for the asset last week. Prices jumped by 1.5% on disappointing data from major US retailers.Risk aversion and investors' search for safe haven not in the US dollar pushed gold prices above the key 200-day SMA.

Demand for gold continues to rise this morning as the greenback falls. The greenback index, reflecting its ratio to its six major peers, was down 0.22% to 102.80.

The dollar is under pressure from renewed demand for equities. Stock markets are now feeling cautiously optimistic about global economic growth.

News of the impending cancellation of the Covid lockdown in Shanghai has boosted demand for equities. For example, S&P 500 futures were up by 1% earlier in the day.

Meanwhile, US government bond yields are also showing positive dynamics on Monday. The indicator is rising ahead of the publication of the May FOMC meeting minutes.

The report is expected to be released on Wednesday. If it shows that some Fed officials are willing to raise interest rates by more than 50bp in June and July, it will be seen by the market as an opportunity for a sharper tightening by the US central bank.A distinctly hawkish tone will trigger another yield rally, which in turn will lead to a stronger dollar and consequently a fall in gold prices.

The May FOMC minutes represent the main risk to the precious metal's quotations this week. However, there are positive factors on the horizon for the asset, which are favorable for a further rise.

In the coming days, investors will continue to closely follow developments related to COVID-19 in China. Positive news should help gold gain strength, as it will point to a much improved demand outlook.

As we know, China is the world leader not only in gold bullion production, but also in gold bullion consumption. Therefore, the lifting of lockdown in Shanghai, which is scheduled for June 1, could push the asset into strong growth.

The precious metal's performance today confirms this. On a wave of optimism and a surge in oil prices, gold is moving further north from the important indicator, the 200-day moving average.

The gold is now approaching the $1,860 barrier.

If they manage to make a breakout and consolidate above this mark in the coming days, it will open the way for further bullion growth to the $1,880 - $1,890 range.