Updated from 11:54 a.m. EDT

Gold prices were tumbling Monday as a cease-fire between Israel and Hezbollah, and news that

BP

(BP) - Get Report

would keep its Prudoe Bay field working at 50% of capacity, were both helping ease investor anxiety over oil supplies.

Comex contracts for December delivery of gold lost $5.10 to close at $639.30 an ounce having hit an intra-day low of $634.10 on the Comex division of the New York Mercantile Exchange (Nymex). Meanwhile, spot oil was skidding $1.25 at $73.10 a barrel, also on Nymex.

The bullion exchange-traded funds, the

iShares COMEX Gold Trust

(IAU) - Get Report

and

streetTRACKS Gold Shares

(GLD) - Get Report

, were also slipping recently, in line with the metal.

"Gold is suffering from the general unwinding of the geopolitical situation," says Jim Steel, a precious-metals analyst at HSBC in New York. He was careful to note that although gold has been tracking oil's direction each day lately, over the long term there appears to be little correlation between the two.

There were, however, other less sanguine views of the Mideast situation.

"The cease-fire is very, very fragile. Is it real, is it honest?" asks Jon Nadler, a metals analyst at Montreal bullion dealers Kitco. "I think the salvation

for gold prices will lie in the return of the physical jewelry trade after Labor Day."

Nadler sees technical support for the December gold contract kicking in between $620 and $625 an ounce, which should help ease the pain of further weakness.

The morning also saw the London Bullion Market Association publish its July volume data, which showed that average daily turnover for the month was 23.2 million ounces, down 10% from the June figure of 25.8 million, but up 59% vs. a year ago from 14.6 million.

"The important thing is that they are much higher than a year ago," says HSBC's Steel, adding that it highlights the fact that bullion trading is increasingly popular. "I wouldn't discount the role of the ETFs."

Among the miners, Vancouver-based

NovaGold Resources

(NG) - Get Report

rejected a $14.50-per-share acquisition offer from

Barrick Gold

(ABX)

. Coincident with that, Nova announced that it had filed a lawsuit against Barrick charging "that in making a competing bid for

Pioneer Metals

... Barrick misused confidential information belonging to NovaGold."

Shares of Nova were recently trading up 1.9%, while those of Barrick were down 1.4%.

Other precious-metals stocks were down, with gold miner

Goldcorp

(GG)

, South African firm

Gold Fields

(GFI) - Get Report

and Latin American gold producer

Yamana Gold

(AUY) - Get Report

all slipping recently.

Shares of

Freeport-McMoRan Copper & Gold

(FCX) - Get Report

were rallying, up 0.4% recently.

Canadian miner

North American Palladium

(PAL)

was also among the losers Monday, shedding almost 3% recently, and down almost 40% in the past three months, while those of U.S. rival

Stillwater Mining

(SWC)

, were also down 2.1%, losing almost 50% in the past quarter year.

In base metals, September Comex copper contracts lifted 6 cents to close at $3.535 a pound, on continued concerns over the

BHP

-

(BHP) - Get Report

and

Rio Tinto

-

( RTP)owned Escondida copper mine, where a labor dispute remains unresolved.

"With the union wanting a 13% pay rise and the company offering 3%, there is still quite a gap to negotiate," writes William Adams, an analyst at Basemetals.com.

Korean steel manufacturer

Posco

(PKX) - Get Report

is being troubled by a 10,000-ton short nickel futures position on the London Metal Exchange (LME), as well as a 20,000-ton deficit of the physical metal that it needs to make stainless steel, according to a report in

The Wall Street Journal

Monday. In a classic case of "he said, she said," the company shot back, via

Reuters

, that the story is nonsense.

Shares of Posco were down 0.6% recently.

The nickel market is experiencing extremely strong demand with limited supply; LME stocks were a mere 5,814 tons Friday, according to the exchange.

Also in nickel, Swiss miner

Xstrata

reports that shareholders have approved its plan to purchase the 80% of shares it doesn't already own in Canadian nickel producer

Falconbridge

( FAL).

Canadian aluminum smelter

Alcan

(AL) - Get Report

announced it would invest $1.8 billion in its Kitimat smelter and so grow total metal output for the company by over 4%. Shares of the company were trading 1.3% down at midmorning; shares of rival

Alcoa

(AA) - Get Report

were down in sympathy, slipping 1% recently.