Gold rises to five-week high with growing risks boosting havens

Gold rose to a five-week high as the crisis in Europe, elevated inflation, and the risk of a US recession boosted demand for the haven asset.

The precious metal climbed as much as 0.5 per cent in early Asian trading after capping a second weekly gain. 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.

History suggests the Federal Reserve will face a difficult task in tightening monetary policy enough to cool price gains without causing a recession, Goldman Sachs Group said in a note, putting the odds of a contraction at about 35 per cent over the next two years. While investors typically seek havens in tough times, higher interest rates may weigh on non-interest bearing bullion.

Spot gold rose 0.4 per cent to $1,985.85 an ounce as of 8.49am in Singapore. It reached $1,988.52 earlier, the highest intraday level since March 14. The Bloomberg Dollar Spot Index added 0.2 per cent. Palladium, platinum and silver all advanced.