By A. Ananthalakshmi
SINGAPORE (Reuters) - Gold extended losses to a third session on Monday, falling over 1 percent in early Asian hours as U.S. President Barack Obama chose to seek Congressional approval before initiating any military action against Syria.
Spot gold had dropped to a one-week low of $1,379.44 before paring some losses to trade down 0.5 percent at $1,388.24 an ounce by 0240 GMT. U.S. gold also fell about 1 percent, while silver eased half a percent.
Gold had risen last week to its highest since mid-May as possible military action against Syria prompted safe-haven buying, but gave up some gains after British lawmakers voted against any involvement.
"The easing tensions in Syria have caused gold prices to dip," said Barnabas Gan, an analyst at OCBC Bank in Singapore.
"Our base case scenario is that the Syrian issue will not blow up. We are still bearish on gold," said Gan, who expects prices for the metal to fall to $1,250 by year end.
Obama stepped back from the brink over the weekend and delayed an imminent military strike against Syria to seek approval from the U.S. Congress in a gamble that will test his ability to project American strength abroad and deploy his own power at home.
Before Obama put on the brakes, the path had been cleared for a U.S. assault. Navy ships were in place and awaiting orders to launch missiles, and U.N. inspectors had left Syria after gathering evidence of a chemical weapons attack that U.S. officials say killed 1,429 people.
Gold has gained about $200 an ounce from its June low of $1,180.71 largely on short covering and technical buying, although it is still down about 17 percent for the year.
But with the drop below $1,400 on Friday, analysts expect further dips. Spot gold may pause around support at $1,376 per ounce, according to Reuters technicals analyst Wang Tao.
September is a key month for gold as many economists expect the U.S. Federal Reserve to begin tapering its commodity-friendly stimulus measures this month. The Fed is expected to commence a two-day policy meeting on September 17.
A scale-back would hurt prices as easy central bank money pushed gold to an all-time high of about $1,900 in 2011.
Recent economic data from the United States has disappointed, indicating that the third quarter has not gotten off to a great start.
"(Economic) indicators are still looking good, though not as favourable as we had hoped for," said OCBC's Gan.
He expects gold prices to drop to $1,250 by year-end if tapering begins this year, and $1,350 if it gets pushed to 2014.
(Reporting by A. Ananthalakshmi; Editing by Joseph Radford)