Gold fell one percent below $1,400 an ounce on Friday on speculation a U.S. military strike on Syria was less likely and as strong U.S. data rekindled expectation of Federal Reserve's stimulus tapering soon.
U.S. officials conceded on Thursday they lacked conclusive evidence that Syrian President Bashar al-Assad personally ordered last week's poison gas attack on civilians, while Britain's parliament rejected British participation in any U.S.-led military action against Syria.
"You have a decrease in the risk premium as it seems that the Syrian action is delayed," VTB Capital analyst Andrey Kryuchenkov said.
"Investors are taking profits because nobody wants to be caught short or long ahead of the weekend, when more developments on the geopolitical front are expected."
Spot gold fell 1 percent to a session low of $1,392.14 an ounce. It was 0.9 percent lower at $1,394.40 an ounce by 1139 GMT.
U.S. gold futures for December delivery dropped $18.10 an ounce at $1,394.80 an ounce.
The metal had risen to a 3-1/2 month high of $1,433.31 on Wednesday and was headed for its second straight monthly gain of around 5 percent after traders who had positioned themselves for further losses at the start of the month, have had to close out those positions, traders said.
"The move higher in August was driven mostly by short-covering and opportunistic buying, which seems to have now run out of steam," Kryuchenkov said.
Strong U.S. GDP and labour data in the previous session also weighed on sentiment as this bolstered the case for the tapering of the Fed's $85-billion monthly bond-buying programme, which could hurt assets such as gold that had been boosted by central bank liquidity over the past four years.
The Fed's next policy meeting is on Sept. 17-18. Until then, markets will continue to scrutinise economic data to gauge the strength of economic recovery.
On Friday, markets were focusing on U.S. personal consumption expenditure (PCE) data for July, the August Chicago Purchasing Managers' Index (PMI) survey and University of Michigan confidence.
The dollar held steady near four-week highs, while 10-year U.S. Treasury yield rose to around 2.8 percent and Brent crude oil slipped to $115 a barrel.
The positive correlation between gold and oil has risen in the past few sessions, as gold is seen as a hedge against oil-led inflationary pressures.
Higher gold prices in seasonally weak August deterred buyers who had splashed out on jewellery, bars and coins earlier this year.
In Hong Kong gold kilo bar premiums declined to $2.50 an ounce from $5 two weeks ago. Tokyo premiums fell to 50 cents from $1.50, while those in Singapore dropped to $1.50.
Silver fell 0.7 percent at $23.66 an ounce. Spot platinum fell 0.3 percent to $1,508.80 an ounce, while spot palladium was down 0.9 percent at $727.50 an ounce.