* U.S.-China tensions over Hong Kong unnerve investors globally
* Palladium on course for strongest week since end-March
* For an interactive graphic tracking the global coronavirus spread, open https://tmsnrt.rs/3aIRuz7 in an external browser (Updates prices)
By Brijesh Patel
May 22 (Reuters) - Gold prices rebounded on Friday as escalating tensions between the United States and China lifted bullion's safe-haven appeal, though a stronger U.S. dollar kept gains in check.
Spot gold XAU= was up 0.4% at $1,732.60 per ounce by 1217 GMT, after falling 1.4% on Thursday. U.S. gold futures GCv1 rose 0.7% to $1,734.
U.S.-China tensions have risen in the past few weeks over the source of the coronavirus pandemic, and China's proposal on Thursday to impose security laws on Hong Kong prompted a strong warning from U.S. President Donald Trump. the fact that most of the equity markets and other commodities are under pressure right now, the uncertainty around the situation in China and the trade relationship with the U.S. is helping gold," said Commerzbank (DE:CBKG) analyst Eugen Weinberg.
The tensions compounded fears of a slower global recovery from the economic damage wrought by the coronavirus crisis, pressuring equity markets but supporting the safe-haven U.S. currency. MKTS/GLOB O/R
The dollar index .DXY jumped 0.5% against its rivals, limiting gold's advance. USD/
Beijing dropped its annual growth target for the first time, highlighting the uncertainty around economic growth that has stalled due to the coronavirus. which is used as an insurance during times of political uncertainty, rose to a more than 7-1/2 year peak earlier this week.
It has held its ground above the key $1,700 per ounce level, building impetus to reach its 2011 peak in the coming quarters, Fitch Solutions said in a note.
Lower-for-longer interest rates with quantitative easing in full swing, macro and geopolitical uncertainty and strong investor flows should continue to support gold prices on a 6-12 month horizon, Fitch said.
Elsewhere, palladium XPD= fell 1.8% to $1,977.04 per ounce, but was still on track for its strongest week since March.
Platinum XPT= rose 0.1% to $833.34 per ounce, while silver XAG= fell 0.1% to $17.04.