Gold rises to 5-week high with growing risks boosting havens

SINGAPORE (BLOOMBERG) - Gold rose to a five-week high on Monday (April 18) as the war in Europe, elevated inflation and the risk of a United States recession boosted demand for the safe haven asset.

The precious metal climbed as much as 0.6 per cent in early Asian trading after capping a second weekly gain.

Spot gold rose 0.5 per cent to US$1,988.89 an ounce as at 7.39am in London, after touching the highest intraday level since March 11 earlier. 

The Bloomberg Dollar Spot Index added 0.3 per cent. Palladium, platinum and silver all also advanced.

The city of Mariupol in Ukraine has not 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. This is adding to already elevated raw material prices, fuelling demand for gold as a hedge against accelerating inflation.

History suggests that 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.

But while investors typically seek havens in tough times, higher interest rates may weigh on non-interest bearing bullion.