Gold Rises to Five-Week High With Growing Risks Boosting Havens

(Bloomberg) — Gold rose to a five-week high as the war in Europe, elevated inflation, and the risk of a U.S. recession boosted demand for the haven asset.

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The precious metal climbed as much as 0.5% in Asian trading after capping a second weekly gain. The strategically vital city of Mariupol hasn’t fallen, but its defenders are encircled by Russian forces, Ukrainian officials said, hours after Kyiv warned of a possible naval landing operation and more air strikes.

The possibility of a de facto European Union embargo on Russian gas and the threat of some curbs on crude in Europe’s next sanctions package bolstered both commodities. That’s adding to already elevated raw material prices, fueling demand for gold as a hedge against accelerating inflation.

Bullion’s advance comes even as 10-year Treasury yields surge toward 3% on signs the Federal Reserve will take an aggressive approach in raising interest rates. History suggests the Fed will face a difficult task in tightening enough to cool price gains without causing a recession, Goldman Sachs Group Inc. said in a note, putting the odds of a contraction at about 35% over the next two years. Higher rates may weigh on non-interest bearing bullion.

“Gold is being reinforced by elevated inflation and heightened geopolitical risk,” said Kelvin Wong, an analyst at CMC Markets in Singapore. Prices rising above the key medium-term technical resistance level of $1,975 is “likely to have attracted momentum-based traders back into the bullish camp,” he said.

Spot gold rose 0.3% to $1,984.39 an ounce as of 10:50 a.m. in Singapore. It reached $1,988.61 earlier, the highest intraday level since March 14. The Bloomberg Dollar Spot Index added 0.2%. Palladium, platinum and silver all advanced.