* U.S.-China tensions over Hong Kong unnerve stock markets
* Palladium on track for biggest weekly gain since March
* Physical gold demand ticks up in Asian hubs
* For an interactive graphic tracking the global coronavirus spread, open https://tmsnrt.rs/3aIRuz7 in an external browser (Updates prices)
By Eileen Soreng
May 22 (Reuters) - Gold gained on Friday as intensifying U.S.-China tensions compounded fears of a slow recovery in a global economy already reeling from the coronavirus pandemic.
Spot gold XAU= rose 0.6% to $1,735.08 per ounce by 1:43 p.m. EDT (1743 GMT), after falling 1.4% on Thursday, and was headed for a small weekly decline. U.S. gold futures GCv1 settled up 0.8% at $1,735.50.
"China's aggressive stance on Hong Kong security could exacerbate already tense relations (with the United States) and a possible confrontation between U.S. warships and Iranian freighters headed for Venezuela are key concerns heading into the long weekend, prompting investor buying," said Tai Wong, head of base and precious metals derivatives trading at BMO. friction came to the fore again over the source of the coronavirus and escalated further with China's proposal to impose security laws on Hong Kong, drawing flak from Washington. tensions compounded fears of a slower global economic recovery, pressuring equity markets but supporting the U.S. dollar, also considered a safe haven. MKTS/GLOB O/R USD/
"Rising trade tensions in the past initially resulted in the USD benefiting primarily from safe haven flows, but escalating tensions on a global basis boosted a flight to safety in both gold and the USD," said Standard Chartered (LON:STAN) Bank analyst Suki Cooper.
"The wider economic and health uncertainty are likely to keep gold prices underpinned. ... Prices are facing technical resistance around $1,765."
Heightening economic woes, Beijing dropped its annual growth target for the first time. considered an insurance during political uncertainty, scaled an over 7-1/2 year peak earlier this week.
On the physical side, demand picked up in top Asian hubs as economies eased lockdowns. GOL/AS
Elsewhere, palladium XPD= fell 3.3% to $1,947.17 per ounce, but was on track for its strongest week since March.
Platinum XPT= was steady at $832.65 per ounce and silver XAG= was 0.6% higher at $17.16.