Gold fell on Thursday after a five-day rally that pushed it to its highest since mid-May, as concerns abated that U.S.-led forces would soon launch a military strike on Syria, while investors awaited U.S. data for clues on the Federal Reserve's next move.
The United States and its allies have been discussing possible military action against Syria in response to last week's deadly chemical attack, stoking safe-haven buying in gold.
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U.S. President Barack Obama has set out the case for a limited military strike but divisions in Britain and among U.S. lawmakers seem set to delay any imminent action.
"The main development today is just a bit of relaxation in the market that we are not going to see an imminent attack on Syria and we are seeing some risk coming back and a stronger dollar," Saxo Bank senior manager Ole Hansen said.
"However, any major correction is probably not what the market is looking for and we should find decent support as we come down towards $1,400 unless we see the dollar strengthen or there is a major shift from the expectations on the U.S. data."
Spot gold dropped 0.7 percent to $1,408.21 an ounce by 0919 GMT. It had gained nearly $70 an ounce in the five sessions to Wednesday to a 3-1/2 month high of $1,433.31.
The dollar rose 0.5 percent, while European shares recovered from a three-day selloff.
Brent crude prices fell below $116 a barrel after climbing to a six-month high on Wednesday. Gold, usually regarded as an inflation hedge, has benefited from soaring crude oil over the past few sessions, as this is one of the main components of the CPI headline inflation.
Markets will be focusing on U.S. initial jobless claims figures and the revision to growth figures from the second quarter.
Gold prices have risen nearly 8 percent this month, their biggest monthly climb since January 2012, after mixed U.S. economic numbers raised doubts that the Federal Reserve could be set to imminently curb its bullion-friendly $85 billion monthly bond-buying programme.
Investors had sold gold heavily in the first half of 2013, pushing prices to their lowest in nearly three years at $1,180.71 on June 28, on speculation that ultra-loose U.S. monetary policy was coming to an end.
Demand for physical gold in Asia slowed this week as spot prices surged and emerging market currencies plunged. Premiums in Singapore, Hong Kong and Tokyo all fell from two weeks ago.
Among other precious metals, silver prices retreated from a 3-1/2 month high of $25.08 an ounce hit on Wednesday, down 1.6 percent to $23.94.
Spot platinum fell 0.6 percent at $1,521 an ounce, while spot palladium was down 1 percent at $735.97 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore; Editing by Jason Neely)