During the Asian trading session on Monday, May 18, spot gold exhibited a 'V' shaped price movement. At the time of reporting, spot gold was trading at $4,534.42 per ounce, down 0.09%, having reached a high of $4,553.99 and a low of $4,479.55. The U.S. dollar index and Treasury yields remained elevated, with expectations of sustained high interest rates from the Federal Reserve continuing to weigh on gold's performance. Concurrently, escalating tensions in the Middle East provided some safe-haven support, keeping gold prices in a state of high-level volatility.

The formal transition in Federal Reserve leadership represents a key variable this week. The Senate officially confirmed Kevin Warsh as the new Federal Reserve Chairman. Chairman Powell's term ended on May 15, but he will remain as a governor. Warsh has previously advocated for maintaining Fed independence, shown a relatively clear inclination towards rate cuts, and supported balance sheet reduction, positioning him as somewhat hawkish. Markets are highly attentive to his first official remarks upon assuming the role. Additionally, the meeting between the U.S. and Chinese heads of state has concluded, leading to a temporary easing of bilateral relations, which has somewhat dampened safe-haven sentiment.

The performance of the U.S. Treasury market further underscores growing inflation concerns. The 2-year Treasury yield rose to 4.086%, its highest level since March 2025. The 10-year Treasury yield increased by 14 basis points to 4.599%, reaching its highest point since May 2025. The 30-year Treasury yield touched 5.131%, also a one-year high.

Simultaneously, the United Arab Emirates and Saudi Arabia nearly simultaneously faced drone attacks from the air. In the UAE, a key nuclear power plant caught fire due to an attack, while Saudi Arabia successfully intercepted multiple drones entering from Iraq. This series of events has heightened tensions in the Gulf region and prompted U.S. President Trump to issue another stern warning to Iran, stating that Tehran's "time is running out." Global crude oil markets responded with a rise, with Brent and U.S. crude futures prices hitting two-week highs.

According to data from the CME FedWatch Tool, traders have largely priced out the possibility of a Fed rate cut this year, while bets on further rate hikes are increasing. Consequently, U.S. Treasury yields remain high, and the dollar index maintains its strength. The market has significantly lowered its expectations for rate cuts this year, with the high-interest-rate environment suppressing gold buying interest.

Furthermore, JPMorgan has revised down its 2026 average gold price forecast from $5,708 per ounce to $5,243 per ounce, citing softening short-term demand as investor client interest "has dwindled to a trickle." The bank's analysts stated in a report released on Sunday, "This lull is reflected in stagnant trading activity and demand indicators. Total open interest and volume in COMEX gold futures remain persistently low, managed money net futures positions are hovering near lows, and ETF inflows are also relatively subdued."

Last week, the gold market opened lower at $4,682.2, initially rallied to a weekly high of $4,774.1, then experienced a strong corrective pullback. By Friday, it hit a weekly low of $4,510.5 before staging a strong rebound, ultimately closing the week at $4,582. The weekly chart formed a large bearish candle with a very long upper shadow. Following this pattern, the market faces technical pressure this week. Regarding key levels, long positions from $4,120 and $4,310 should have stops trailed to $4,400 after taking partial profits. The short position from $4,588 on Friday should have its stop trailed to $4,582 after partial profit-taking. For today's session, consider shorting at $4,576 with a stop at $4,582, targeting $4,532, $4,520, and $4,510. A break below these levels could see a move towards $4,500 and $4,490.