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Gold down as Syria concerns ease; silver up on China PMI

Monday, 2 Sep 2013 | 8:50 AM ET
AP

Gold edged below $1,400 an ounce on Monday as a delay in possible U.S. military action in Syria and improved economic data from China and Europe boosted the appetite for riskier assets, reducing its appeal as a safe haven.

But silver gained as much as 3.8 percent earlier, benefiting from strong economic numbers in China, where the manufacturing sector in August had its best performance for more than a year.

"The main supporting factor for silver has been the China PMI (purchasing managers' index), which aids the more industrial precious metals as well as copper," Societe Generale analyst Robin Bhar said.

"Also, the easing intentions of Obama wanting...the Congress to vote on the possible Syrian attack has seen the safe-haven bid come off, helping other financial markets and certainly silver, which is for the moment outperforming gold."

(Read more: This is what could keep gold going)

Spot gold was down 0.4 percent at $1,389.49 an ounce by 1158 GMT, after falling to a one-week low of $1,374.10 earlier. Prices were on track for a third day of declines.

Traders said volumes were likely to be thin throughout the day, because U.S. markets are closed for the Labor Day holiday.

U.S. President Barack Obama said he would seek congressional authorization for punitive military action against Syria, almost certainly delaying any strike until Washington's summer recess ends on Sept. 9.

European shares rose sharply after strong euro zone data showed factory activity rose at its fastest pace in over two years, while oil prices firmed after a slow start.

(Read more: Here's the one way to make money in gold now: Pro)

Gold last week rose to its highest since mid-May to $1,433.31 on speculation of a strike against Syria, but gave up some gains after UK lawmakers voted against any involvement.

Pisani: Syria & unintended consequences
CNBC's Bob Pisani says the markets are worried about the unintended consequences of an attack on Syria. What would happen to stocks, bonds, the dollar and gold in the event of a strike?

Fed tapering

September is a significant month for gold. Many economists expect the U.S. Federal Reserve to decide whether to begin tapering its commodity-friendly stimulus measures this month. The central bank is scheduled to commence a two-day policy meeting on Sept. 17.

A scaling back would hurt prices. The metal has been boosted by central bank liquidity over the past four years.

Investors are scrutinizing economic data to gauge the strength of economic recovery and predict when the Fed is likely to start curbing its $85 billion per month bond-buying program.

The focus will be on major central bank meetings throughout the week and a series of crucial U.S. economic data, culminating in the most important on Friday - the payrolls report.

(Read more: Data won't end taper debate, but just might be 'good enough')

"Market players ... hope that the (U.S. labor market report) will give them some indication of when the U.S. Federal Reserve may begin reducing its bond purchases," Commerzbank said.

Elsewhere, bullish bets on gold futures and options placed by hedge funds and other money managers hit their highest levels since January at 97,902 contracts in the week to Aug.27, from 73,216 a week earlier.

Silver was up 2.2 percent to $23.97 an ounce. The gold/silver ratio was at its lowest since mid-April at around 57.70, compared with a three-year high of 67 at the end of July.

Spot platinum rose 0.3 percent to $1,519.74 an ounce, while spot palladium gained 0.2 percent to $720.72 an ounce.

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