(Recasts for EMEA morning hours)

* US 10-year Treasury yields rise to their highest since

February 2025

* Brent rises above $110/bbl on fresh Middle East

tensions

* Traders see 40% chance of a US interest rate hike in

December

By Noel John

May 18 (Reuters) - Gold edged higher on Monday from a

more than one-and-a-half-month low hit earlier in the session,

although gains were capped as rising fears of inflation and

elevated interest rates pushed global bond yields higher.

Spot gold was up 0.2% at $4,546.04 per ounce, as of

0907 GMT, after hitting its lowest level since March 30 earlier

in the session. U.S. gold futures for June delivery lost

0.3% to $4,549.70.

"The decline (in gold prices) is technically stretched, and

markets don't seem ready to let gold drop into a bear territory

as the structural case for gold remains intact, helping it find

support," said Nikos Tzabouras, a senior market analyst at

Jefferies-owned Tradu.com.

However, "with markets pricing out any Federal Reserve rate

cuts (this year) and hike bets on the rise, higher-for-longer

prospects are dealing a direct blow to non-yielding assets like

gold," he added.

Bonds from Tokyo to New York extended losses on Monday, with

benchmark 10-year U.S. Treasury yields climbing to

their highest since February 2025, as rising energy prices from

the ongoing Middle East war fanned inflation fears and stoked

investor wagers on rate hikes from global central banks.

Brent crude oil rose above $110 a barrel as efforts to end

the Iran war appeared to have stalled, keeping the key waterway

of the Strait of Hormuz largely closed.

Traders are now increasingly pricing in a U.S. interest rate

hike before year-end, with a 40% chance of a hike in December,

according to CME Group's FedWatch tool.

Meanwhile, banks have started trimming their near-term gold

price forecasts due to softer investor demand, with J.P.Morgan

among the first major lenders to cut its 2026 average gold price

forecast to $5,243 per ounce from $5,708.

"While the coming weeks could still be quite volatile over

the twists and turns in negotiations and interest rate

repricing, this resolution (to U.S.-Iran war) is key to

beginning to re-stoke investor interest and demand for gold,"

analysts at the bank noted.

Spot silver rose 0.1% to $75.99 per ounce, platinum

was steady at $1,973.32, and palladium was up 0.3%

at $1,416.55.