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Gold Heads for Third Weekly Gain on Rising Demand for Havens

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(Bloomberg) -- Gold traded near a one-month high -- after jumping the most since March on Thursday -- as US-China tensions and a deepening global economic slowdown buoyed demand for haven assets.

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Bullion headed for a third weekly gain, even as prices slipped on Friday, after China likely fired missiles over Taiwan during military drills. Beijing has responded aggressively to US House speaker Nancy Pelosi’s visit to the island this week.

There were more signs that the fight to cool inflation will weigh on global growth. The Bank of England unleashed its biggest rate hike in 27 years on Thursday as it warned the UK is heading for more than a year of recession, while Cleveland Federal Reserve Bank President Loretta Mester said US interest rates need to be raised above 4%.

“Safe-haven demand continues to support gold ahead of the non-farm payroll data,” said Gnanasekar Thiagarajan, director at Commtrendz Risk Management Services. “It could get a bit choppy ahead of the data. Central banks acknowledging recession is also underpinning sentiment for the precious metal, which was under pressure due to rising yields.”

Gold has risen about 5% from a low on July 20, benefiting from a weakening dollar and falling US bond yields. Traders will be looking at US non-farm payrolls data Friday for clues on the Fed’s tightening path. The report will likely show that hiring softened in July, according to Bloomberg Economics.

The precious metal has also benefitted from a “marked fall in real bond yields, which have decreased by around 40 basis points over the past two weeks,” according to Commerzbank AG analyst Carsten Fritsch.

“For a time, real yields dropped to their lowest level since the end of May, almost reaching the zero line again,’ Fritsch said in a note. “What is more, the yield curve in the US is more inverse than at any time since the year 2000, which signals a growing risk of recession.”

Spot gold dropped 0.3% to $1,785.28 an ounce by 11:42 a.m. in London. It is up 1.1% this week after climbing to $1,794.97 on Thursday, the highest intraday level since July 5.

The Bloomberg Dollar Spot Index edged up 0.1%. Silver eased, while platinum and palladium advanced.

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