On Monday, May 18, during the early Asian trading session, spot gold experienced a sudden and sharp decline, with prices dropping to around $4,480 per ounce, marking a significant intraday fall of approximately $55. Analysts attribute this downward pressure on gold to a combination of factors, including rising oil prices, which reached a two-week high following the latest developments in the Middle East, and a strengthening US dollar. The slow progress in reopening the Strait of Hormuz has continued to fuel inflation concerns and triggered a sharp sell-off in bond markets, contributing to gold's ongoing decline that began last week. Gold prices fell nearly 4% over the previous week.
Tensions between the US and Iran have escalated, with both sides exchanging strong rhetoric. Amid efforts to end the US-Israel conflict with Iran appearing to stall, US President Donald Trump warned that Iran is "running out of time" and cautioned that if the Iranian regime does not propose a better deal, "they will suffer heavier blows." In response, Abolfazl Shekarchi, a senior spokesperson for the Iranian armed forces, stated on Sunday that if Trump's threats are acted upon, the US would "face new, intense, and unexpected situations and sink into a self-inflicted quagmire."
From a technical perspective on the daily chart, gold has breached the support level of short-term moving averages, shifting from a previously strong upward trend to a pattern of high volatility. The key support at the neckline of the earlier double-top formation around $4,600 has been decisively broken, signaling a clear transition into a bearish downtrend. While daily indicators such as the KDJ and RSI have entered deeply oversold territory, suggesting a strong technical rebound is possible in the short term, the overall trend remains characterized by a pause in decline and corrective rebounds rather than a reversal. Post-rebound, prices are likely to continue their downward trajectory.
On the 4-hour chart, the Bollinger Bands are widening downward, indicating an expansion of the price range to the downside. Prices are closely tracking the lower band, reflecting dominant bearish momentum and suggesting further potential declines. The RSI (Relative Strength Index) is in oversold territory, pointing to a rapid short-term drop in gold prices. However, oversold conditions also imply the possibility of minor corrective rebounds, though such movements are expected to be limited and insufficient to reverse the overall bearish sentiment. In summary, the recommended trading strategy for gold today is to focus on selling during rebounds.
Gold Trading Strategy: Strategy: Sell at $4,548–$4,550, with a stop loss at $4,570, targeting around $4,480.
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