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) 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) and streetTRACKS Gold Shares ( GLD), 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) 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) 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) and Rio Tinto- 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

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.