Updated from 11:52 a.m. EDT

Precious metals prices soared Friday as the conflict between Israel and Lebanon heightened and investors sought sanctuary in safe-haven investments such as gold and silver. Contracts for August delivery of gold closed up $13.6 to $668 per ounce on the Comex division of the New York Mercantile Exchange (Nymex). Silver followed suit, with September contracts up 4.5 cents to $11.55 an ounce by the end of trading.

Shares of the bullion-exchange-traded funds iShares Comex Gold Trust ( IAU), streetTRACKS Gold Shares ( GLD) followed futures prices higher, although the iShares Silver Trust ( SLV) was recently down 1.3%.

Gold miners such as Barrick Gold ( ABX), Newmont Mining ( NEM - Get Report) and Freeport-McMoRan Copper and Gold ( FCX - Get Report) were rallying. The AMEX Gold Bugs Index was up 1.1%.

As the Mideast tension has prompted a rush into so-called safe-haven investments such as gold, the accompanying surge in oil prices has some observers concerned that the uncertainty caused by the conflict may translate into slower economic growth. (Crude hit another record Friday, trading as high as $78.40 a barrel in electronic Nymex trading; recently, crude was up 75 cents to $77.45.)

"The shocks from the Middle East now have the potential to be more negative than the shocks we had last year, such as Katrina and the runup in oil prices," says Lakshman Achuthan, managing director of the Economic Cycle Research Institute, or ECRI. He notes that the economy is in a much more fragile state than it was a year ago.

Newly released ECRI data show evidence that economic growth is already slowing. The firm's Weekly Leading Index of Growth was up only 0.2% vs. 0.4% the previous week. The firm's Monthly Index shows a decline in growth to 0.9% from 2.1% in June. Although Achuthan says a recession is not a certainty yet, he notes that the cyclical effect of a slowdown would likely mean softer metals prices as industrial demand retreats.

Shares of diversified miners BHP ( BHP) and Rio Tinto ( RTP) were trading down at midmorning. Shares of U.S. copper producer Phelps Dodge ( PD) were barely changed as copper prices remained firm on supply worries.

Comex copper contracts closed up 3.6 cents to $3.713 a pound as traders kept a watchful eye on labor negotiations at Chile's massive Escondida copper mine due to concerns that supplies of the red metal may be disrupted.

In the other precious metals, Nymex October platinum ended the session up $3.5 at $1,267.5 an ounce, while palladium traded up 95 cents to $335 an ounce by the close.

Shares of palladium miner Stillwater Mining ( SWC) were trading up almost 1% at $11.39. Meanwhile, stock of North American Palladium ( PAL) sank slightly despite the strong metal price and improved operating performance by the company. The firm saw a 20% increase in second-quarter palladium output, according to a company release made slightly before the opening bell.

"They are coming from a poor base," says Kevin Walkush, equity analyst with Morningstar. "They had nowhere to go but up," and also notes that NAP's management needs to deliver high-quality earnings on a consistent basis before he'd recommend the stock over Stillwater, his preferred pick of the two. Until then he remains in a wait and see mode.