Where we are: Gold is under pressure, currently trading near $4,465/oz, consolidating losses from the previous session. Overnight, XAU traded in a relatively tight range, failing to break above $4,500. The current level is well below the prior NY close, suggesting further downside potential if momentum continues.
What’s driving it: The primary headwind for gold remains the steady rise in US real yields. The 10-year TIPS yield is currently at 2.13%, up 3bp from Monday, making the opportunity cost of holding non-yielding gold more expensive. This is compounded by a slight increase in 10-year breakeven inflation, now at 2.49%, suggesting inflation expectations are not rising fast enough to offset the increase in real yields. Fresh comments from various BIS central bankers are unlikely to provide a tailwind, focused more on broader geo-economic issues and artificial intelligence.
- US 10Y Real Yield is up 3.0bp d/d as of 2026-05-18, a clear headwind for gold.
- 10Y Breakeven Inflation is only up 1.0bp d/d, failing to offset the real yield increase.
- Speculator positioning in gold remains modestly long, with net non-commercial positions at +171,622 contracts, sitting at the 29th percentile, leaving some room for further liquidation.
NY session focus: The key event for the NY session is the release of the FOMC Meeting Minutes at 14:00 ET. Traders will be scrutinizing the minutes for any clues about the Fed’s future policy path and its tolerance for inflation. Watch for a break below $4,450, which could trigger further selling toward $4,400. The trade that’s working right now is shorting XAU/USD on rallies. The biggest risk is a dovish surprise in the FOMC minutes, which could send real yields lower and trigger a sharp rally in gold. The pain trade is a surprise dovish tilt from the Fed causing a rapid short covering rally.