Gold falls 1% as possible US strike on Syria delayed

Gold extended losses to a third session on Monday, falling over 1 percent in early Asian hours as US President Barack Obama chose to seek Congressional approval before initiating any military action against Syria.

Spot gold had dropped to a one-week low of USD 1,379.44 before paring some losses to trade down 0.5 percent at USD 1,388.24 an ounce by 0240 GMT. US gold also fell about 1 percent, while silver eased half a percent. Also read: India's crisis within a crisis; FM fights on two fronts Gold had risen last week to its highest since mid-May as possible military action against Syria prompted safe-haven buying, but gave up some gains after British lawmakers voted against any involvement. "The easing tensions in Syria have caused gold prices to dip," said Barnabas Gan, an analyst at OCBC Bank in Singapore. "Our base case scenario is that the Syrian issue will not blow up. We are still bearish on gold," said Gan, who expects prices for the metal to fall to USD 1,250 by year end. Obama stepped back from the brink over the weekend and delayed an imminent military strike against Syria to seek approval from the US Congress in a gamble that will test his ability to project American strength abroad and deploy his own power at home. Before Obama put on the brakes, the path had been cleared for a US assault. Navy ships were in place and awaiting orders to launch missiles, and U.N. inspectors had left Syria after gathering evidence of a chemical weapons attack that US officials say killed 1,429 people. Gold has gained about USD 200 an ounce from its June low of USD 1,180.71 largely on short covering and technical buying, although it is still down about 17 percent for the year. But with the drop below USD 1,400 on Friday, analysts expect further dips. Spot gold may pause around support at USD 1,376 per ounce, according to Reuters technicals analyst Wang Tao. Fed tapering September is a key month for gold as many economists expect the US Federal Reserve to begin tapering its commodity-friendly stimulus measures this month. The Fed is expected to commence a two-day policy meeting on September 17. A scale-back would hurt prices as easy central bank money pushed gold to an all-time high of about USD 1,900 in 2011. Recent economic data from the United States has disappointed, indicating that the third quarter has not gotten off to a great start. "(Economic) indicators are still looking good, though not as favourable as we had hoped for," said OCBC's Gan. He expects gold prices to drop to USD 1,250 by year-end if tapering begins this year, and USD 1,350 if it gets pushed to 2014.