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Gold Futures Rebound

June-dated contracts rise $2.50 to close at $671.50 an ounce.

Updated from 11:54 a.m. EDT

Gold prices

rebounded from an early decline and finished higher Monday, but traders failed to find enough fear-inducing headlines to spur a major rally.

June-dated contracts rose $2.50 to close at $671.50 an ounce on the Comex division of the New York Mercantile Exchange, rebounding from a low of $661.70.

The bullion exchange-traded funds, which hold inventories of the metal,

streetTracks Gold Shares

(GLD) - Get Free Report


iShares Comex Gold Trust

(IAU) - Get Free Report

, followed suit.

The ongoing diplomatic spat between Britain and Iran had put a bid under gold in recent days, but for the moment at least, the standoff hasn't appreciably worsened, limiting the demand for safe-haven hard assets like precious metals.

Iran took 15 British military personnel hostage March 23 for allegedly trespassing in its territorial waters, a charge denied by U.K. authorities, who are in turn demanding the immediate return of the prisoners and their equipment.

"Gold dealers want to see concrete negative news before giving the price a

major boost," says Jon Nadler, an analyst at Montreal-based bullion dealer Kitco, who notes that the usual maxim of "buy the rumor, sell the news," wasn't holding. "Traders will need to see bullets flying."

Additionally, Nadler says the shortened trading week will create an air of caution because speculators will be unwilling to leave open significant short or long positions during the extended weekend. U.S. markets are closed Friday and London celebrates a bank holiday next Monday.

Turning to the currency markets, last week's news that the U.S. had instituted new tariffs on certain Chinese paper products sparked fears that a trade war might develop, softening the greenback, an effect that continued through the weekend.

One dollar was recently buying 117.82 yen, down from 117.84 yen late Friday. A euro was trading for $1.3368, up from $1.3358 previously. The price of gold tends to increase over time as the value of the dollar declines.

In other economic news, the Institute for Supply Management index, which tracks activity in the manufacturing sector, fell more than expected.

As for the precious-metals patch, shares of


(IAG) - Get Free Report

and those of

Kinross Gold

(KGC) - Get Free Report

were both rising, up 0.9% each.

Among base metals, copper prices lifted 3 cents to $3.18 a pound, despite a slight increase in metals stocks on the London Metal Exchange.

Meanwhile, Merrill Lynch reinstated coverage of

Freeport-McMoRan Copper & Gold

(FCX) - Get Free Report

with a neutral rating. Merrill's New York-based analyst David Lipschitz is looking for strong first-half earnings to soften in the second half.

Shares of Freeport were recently ahead 0.5%.

In ferrous metals, Prudential upgraded its rating on

U.S. Steel

(X) - Get Free Report

to neutral from underweight and raised its stock price target to $95 a share from $65.

Shares of U.S. Steel were rising in recent action, up 1.5%.