Spot gold slips as As Syria fears ease

FRANKFURT (Aug 29) Gold prices pulled back Thursday as concerns over a Western strike on Syria eased, stemming the flow of funds into traditional safe-haven assets like gold and U.S. Treasurys.

Wednesday, U.S. President Barack Obama said he hadn't decided on a response to Syria's alleged use of chemical weapons. Attempts by the U.S. and its allies to gain wider approval for military strikes met with resistance.

Concerns that a Western strike on Syria was imminent propelled spot gold prices to three-and-a-half month highs at $1,433.85 a troy ounce Wednesday, as investors ploughed cash into traditional stores of value like bullion. At 0854 GMT Thursday, spot gold was down 0.8% at $1,406.20 an ounce in Europe.

"With the threat of a military strike in Syria no longer immediately imminent we could see a modest retracement set in here [for gold]," said INTL FCStone analyst Edward Meir.

Still, gold prices are liable to renew their ascent if Syrian tensions escalate again, said Mr. Meir.

"Given the fluidity of the situation, we still think that both gold and oil prices will be well supported on major setbacks," he said.

Gold, platinum and palladium prices may also find support from labor unrest in South Africa's mining sector, said HSBC analyst James Steel.

South Africa's National Union of Mineworkers is preparing to submit a 48-hour strike notice to gold producers as early as Friday. Last weekend, the union submitted fresh demands to gold producers, calling for a wage increase of around 50% for entry-level gold miners and said it would submit a strike notice after seven days if companies didn't meet their demand.

"The platinum group metals and gold to a lesser extent may be buoyed by supply concerns in South Africa," said Mr. Steel. "Platinum group metals production is more concentrated in South Africa than that for gold as the country is the world's largest platinum producer and the second largest palladium producer."

South Africa is the world's fifth-largest gold producer.

At 0853 GMT, spot silver was down 1.7% at $23.900 an ounce, spot platinum was 1.2% lower at $1,516.75 an ounce and spot palladium was down 0.8% at $736.70 an ounce.