Spot gold prices closed higher on Monday, May 18th, ending a four-day losing streak. A weaker US dollar was the primary driver behind the rebound.
However, analysts noted that gold's gains were capped as concerns over inflation and potential interest rate hikes, fueled by the Iran conflict, pushed US Treasury yields higher. The 10-year Treasury yield briefly climbed to a near two-year high of 4.631% before settling at 4.595%.
Spot gold closed up $26.37, or 0.58%, at $4,566.07 per ounce. During the session, it touched a low of $4,480.44, its weakest level since March 30th.
A softer US dollar, with the ICE Dollar Index down 0.3%, made dollar-priced gold cheaper for holders of other currencies. This was seen as a positive factor for the gold market.
Yet, rising bond yields may limit gold's upside and could exert further downward pressure in the near term. Global sovereign bonds fell, with the 10-year US yield hitting its highest level since February 2025, reflecting inflation fears and expectations of central bank tightening amid higher energy prices due to the Iran war. Gold, which offers no yield, loses appeal when interest rates and bond yields are high, as investors seek higher-returning assets.
Gold prices are also closely tracking oil movements. Oil prices rose about 2% intraday to a two-week high on supply disruption fears, weighing on gold. However, reports citing Iranian media about potential US sanctions waivers on Iranian oil later caused prices to retreat.
Since the US-Israel conflict with Iran began on February 28th, Brent crude has risen approximately 55%, while spot gold has fallen about 14%.
With investor demand waning, some banks have begun lowering their short-term gold price forecasts. JPMorgan Chase was among the first major banks to cut its 2026 average gold price forecast, revising it down to $5,243 per ounce from $5,708.
Key US economic data this week includes the four-week average of ADP employment, housing data, the previous FOMC meeting minutes, initial jobless claims, preliminary PMI readings, speeches from Federal Reserve officials, and Kevin Warsh's swearing-in as Fed Chair at the White House.
From a technical perspective, after hitting a seven-week low of $4,480, gold continues to consolidate around $4,550. The Relative Strength Index (RSI) indicates weak momentum, suggesting a potential retest of the $4,500 level.
On the upside, the next area of focus is $4,600. A break above could face resistance from a trendline extending from the mid-March highs near $4,615-$4,625, followed by the 20-day Simple Moving Average (SMA) at $4,647. A breach of this resistance could target $4,700 and the 50-day SMA at $4,716.
On the downside, initial support lies at the psychological level of $4,550, followed by the intraday low from May 4th at $4,500, and then Monday's low of $4,480.
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