Gold has fallen to its lowest price in seven weeks, reflecting a belief among fund managers that the chances of an attack on Iraq are receding.
Spot gold was quoted at $346.00/347.00 an ounce at 10.50 a.m., down from $350.50/351.50 in New York late on Friday and off a six-and-a-half year high of $388.50 earlier this month.
"The gold market is saying that war is not a certainty, despite the fact that Colin Powell is still talking tough," said Mr Paul Lee at Dresdner Kleinwort Wasserstein in Sydney.
After a weekend of huge global anti-war protests, a meeting of European Union leaders in Brussels today is likely to focus attention again on the rift between among member states over the Iraq issue.
Diplomatic hard bargaining over Iraq, coupled with a stronger dollar and firmer European stock markets is also pressuring bullion.
Gold hit a low of $341.00 in Asian trading, its weakest point since December 23rd last year and 12 per cent off the six-and-a-half year price high.
Bullion was set or "fixed" in the London morning session at $346.55 a troy ounce, down from the previous fix of $354.25 and its lowest fix since January 3rd.