Updated from 12:23 p.m. EDT

Gold prices tumbled Monday as concern over the conflict in the Mideast waned on hopes that the fighting could be over within a few days.

Futures contracts for August delivery of gold closed down $16.10 at $651.90 on the Comex division of the New York Mercantile Exchange (Nymex). Other precious metals followed the yellow metal, with silver ending down 46 cents to $11.07 an ounce, platinum off $14 at $1,250 an ounce and palladium losing $11.85 at $323 an ounce.

"The expectation over the weekend was that we would see further gains in gold, but we saw oil come down this morning and then some news that Israel may be close to the end of its military action ," says Brian Hicks portfolio manager at San Antonio, Texas-based US Global Investors, who manages the ( PSPFX) Global Resources fund.

Shares of the bullion-exchange-traded funds iShares Comex Gold Trust ( IAU), streetTRACKS Gold Shares ( GLD) and iShares Silver Trust ( SLV) followed futures prices lower.

Shares of gold miners Barrick Gold ( ABX), Newmont Mining ( NEM) and Freeport-McMoRan Copper and Gold ( FCX) were also trading sharply down.

Hicks notes that high oil prices, the generally weak equity markets, as well as investor skepticism that gold prices can stay above $600, have conspired to dog gold miner shares lately.

"Gold stocks are large consumers of energy, and the high oil prices are somewhat of a headwind for profitability," says Hicks. "Clearly the underlying commodity has been stronger than the stocks."

The Market Vectors Gold Miners ETF ( GDX) which holds a diversified group of gold mining shares, was trading down at midmorning. Since July 11 it is down about 3%, vs. a rise of over 2% for the StreetTRACKS Gold ETF, which holds bars of bullion.

Meanwhile in base metals, copper traded down 11 cents to close the trading session at $3.60 per pound, in line with concerns over a slowing economy but still high historically and likely to remain there through 2007, according to a report released Thursday. The analysis, by the Economist Intelligence Unit, sees copper averaging $3.54 a pound during 2007 before falling back to $2.53 in 2008.

" Inventories remain at critically low levels, and supply uncertainties in Latin America continue to attract investor and speculative interest," the report states.

Copper stocks on the London Metal Exchange were up 525 at 94,100 tons.

Meanwhile, shares of Phelps Dodge ( PD) were recently down 3.8% after the copper giant upped the ante this weekend in its ambitious plan to buy rival miner Inco ( N).

Cocoa Prices Nosedive

The price of cocoa went tumbled Monday, falling $160, or 11.6, to $1,558 a metric ton in moderate trading of approximately 8,200 contracts on the New York Board of Trade.

The nosedive in the key ingredient of chocolate came as short sellers tried to put the squeeze on the massive speculative positions that investors have accumulated over the past few weeks, according to analysts at CPM Group, a New York-based commodities consulting company.

Open interest in NYBOT cocoa contracts hit at total of 50,506 on July 11 (the most recent data available) having grown from 12,469 as recently as June 27, says Rohit Savant, agricultural commodities analyst at CPM. A positive open interest shows that investors have a net long position, or are betting that the price of the contracts will increase.

And it was that show of accelerating bullish sentiment that CPM says whetted the appetite of short sellers who successfully drove the price lower -- triggering stop-loss orders and sending the price into a tailspin.

"The market is likely to remain volatile," says Savant who notes that the fundamentals for the cocoa market remain strong.

He says traders are currently focusing in on upcoming elections in Ivory Coast due to take place on Oct. 31, but were originally set for last October. Ivory Coast provides 40% of the world's cocoa and usually uses immigrant labor to pick the crop starting October. In the event that elections cause domestic civil strife it is feared the crops may go unpicked and supply could be disrupted.

Chocolate manufacturers, such as Hershey ( HSY) and Cadbury Schweppes ( CSG), will likely not benefit materially even if the prices do go lower, because most manufacturers use long-term fixed price contracts to lock in the price and supply of the beans they need. In addition, the benefits of any unhedged cocoa supply will likely be dwarfed by increases in the price of other raw materials such as energy, says Mitchell Corwin equity analyst with Morningstar.

Corwin likes the fundamentals underpinning Cadbury of extremely powerful global brands in chocolate (Diary Milk), sugar confectionary (Hall's), and gum (Trident, Dentine) as well as soft drinks (Dr Pepper, Snapple etc.) which should outweigh short-term problems related to a UK health scare and product recall in June.

He is less bullish on Hershey, which, he says lacks the global presence of its U.K.-based rival.