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Gold demand rises on fears of Syria attack

THE possibility of Western military action in Syria hit shares worldwide yesterday, while boosting demand for safe-haven assets such as yen and gold.

Wall Street opened lower, with the S&P 500 falling 0.8pc and a rise in US government debt prices suggesting the flight to safety had gathered momentum. The benchmark 10-year US Treasury note was up 7/32, the yield at 2.7616pc.

In the currency market, the yen and Swiss franc gained and riskier currencies such as the Australian and New Zealand dollars fell as geopolitical tensions rose.

The Swiss franc and the yen usually climb in times of financial market stress and geopolitical uncertainty, while growth-linked higher-yielding currencies are sold off.

"Coming within the current nervous state of the markets, any flare-up or intensification of Middle Eastern tensions will surely take a further toll on risk sentiment," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.

Spot gold rose to its highest since early June at around $1,420 (€1,061) an ounce. Gold has rallied more than $200 since late June, when prices hit three-year lows.

The Dow Jones industrial average was down 88.28 points, or 0.59pc, at 14,858.18. The Standard & Poor's 500 Index was down 14.26 points, or 0.86pc, at 1,642.52. The Nasdaq Composite Index was down 36.70 points, or 1pc, at 3,620.87.

Western powers told the Syrian opposition to expect a strike against President Bashar al-Assad's forces within days, according to sources who attended a meeting between envoys and the Syrian National Coalition in Istanbul.

"The opposition was told in clear terms that action to deter further use of chemical weapons by the Assad regime could come as early as in the next few days and that they should still prepare for peace talks at Geneva," one of the sources said.

Emerging market currencies such as the Turkish lira and the Indian rupee bore the brunt of the flight as doubts over the Syrian situation added to pressure from investors' positioning for an end to the supply of cheap dollars from the US Federal Reserve's monetary stimulus.

The Indian rupee lost as much as 2.5pc to reach a record low of 65.93 per dollar, while Turkey's lira weakened to 2.03 to the dollar, also a record low.

Brent crude oil for October climbed above $113 a barrel, while US crude was up $2.86 to $108.78.

Russia's rouble, which normally benefits from stronger oil prices, hit a four-year low against the dollar-euro basket on concern over Syria.

As Syria's key ally and arms supplier, Russia has urged Washington not to use military force against Assad's government. Traders said its response to any US attack would be key to whether the current shift into safer assets turned into a major flood.

In Europe, the FTSEurofirst 300 index fell to levels not seen since late July. Asian markets fell 1.2pc, while Tokyo's Nikkei ended 0.7pc lower. That left the MSCI all-country world equity index down nearly 1pc for a second day of falls. (Reuters)

Irish Independent