PRECIOUS-Gold falls 1.5 percent on hopes for Syria solution

Tue Sep 10, 2013 4:24pm EDT

* Crude oil falls 2 percent, U.S. equities rally
    * Fed policy outlook still unclear ahead of next week's
meeting
    * Gold ETF holdings drop
    * Coming up: U.S. wholesale inventory Wednesday

 (Adds analyst comment, second byline, dateline, updates market
activity)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, Sept 10 (Reuters) - Gold prices fell 1.5
percent on Tuesday as the precious metal's safe-haven appeal
retreated after Syria accepted a Russian proposal to give up
chemical weapons to win a reprieve from possible U.S. military
strikes.
    While riskier assets such as U.S. equities rallied on the
news, gold was pressured as crude oil futures fell 2
percent on easing geopolitical tensions. Encouraging industrial
output data from China also boosted economic hopes and weighed
on gold. 
    Bullion fell for a second day as major western powers began
working on a United Nations resolution to create a timetable and
process for ensuring it happens. On Monday, U.S. President
Barack Obama said he saw a possible breakthrough in the crisis,
referring to Russia's proposal. 
    "A diminishing geopolitical threat may lead gold investors
to shift focus away from a receding factor influencing the
market to ... next week's FOMC meeting, and the question of the
timing and scale of any Fed tapering," said James Steel, chief
precious metals analyst at HSBC.
    The U.S. central bank's Federal Open Market Committee is set
to release a policy statement at the end of its two-day meeting
next Wednesday.
    While consensus is building among analysts that the Fed
could begin to slash its $85 billion monthly bond purchases as
early as September, disappointing U.S. nonfarm payrolls data
last week could complicate an otherwise rosy economic outlook.
    Spot gold dropped as much as 2.1 percent to a near
three-week low of $1,357.34 an ounce earlier. It was last at
$1,358.30, down 1.6 percent, by 4 p.m. EDT (2000 GMT). 
    U.S. gold futures for December delivery settled down
$22.70 at $1,364 an ounce, with trading volume about 25 percent
below its 30-day average, preliminary Reuters data showed.    
    On Aug. 28, gold rallied to a three-month high above $1,430
on fears Western powers led by the United States would launch
missile strikes to punish Syria's President Bashar al-Assad's
forces for chemical weapons attacks that killed hundreds of
civilians on Aug. 21. 
     "The whole reason gold rallied in the last few weeks has
been on the back of the Middle East tension and the rise in the
oil price, but that now is going into reverse with the
possibility of an agreement," Societe Generale analyst Robin
Bhar said.
    As a gauge of investor interest, holdings in the SPDR Gold
Trust, the world's largest gold-backed exchange-traded
fund, fell 0.23 percent to 917.13 tonnes on Monday from 919.23
tonnes on Friday. 
    Among other precious metals, silver tracked gold
lower, falling to a three-week low of $22.76 an ounce. It was
last down 3.1 percent to $22.92.
    Platinum fell 0.8 percent to $1,468.25 an ounce,
while palladium was up 1.4 percent at $692.47 an ounce on
bargain hunting after a recent drop on easing supply worries in
South Africa.
 4:00 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold DEC   1364.00 -22.70  -1.6  1357.60 1391.40  123,888
 US Silver DEC  23.016 -0.701  -3.0   22.840  23.820   40,560
 US Plat OCT   1474.10  -8.90  -0.6  1471.00 1488.80    8,400
 US Pall DEC    692.65   9.65   1.4   684.20  696.55    3,305
                                                               
 Gold          1364.26 -22.68  -1.6  1358.30 1390.66         
 Silver         22.920 -0.740  -3.1   22.830  23.760
 Platinum      1468.25 -11.35  -0.8  1472.75 1485.00
 Palladium      692.47   9.47   1.4   686.00  693.25
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        131,334   161,456   182,106     22.56    0.46
 US Silver       43,404    67,776    58,235     34.83   -0.91
 US Platinum      9,968    10,169    12,279     22.26    0.00
 US Palladium     3,418     6,785     5,844                  
                                                               
 
 (Additional reporting by Lewa Pardomuan in Singapore; Editing
by Jason Neely, James Jukwey and James Dalgleish)
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