Updated from 2:06 p.m. EST

Gold prices in New York rose Friday, with geopolitical tensions and short-covering providing the catalysts.

February-dated bullion contracts rallied $13 to close at $626.90 an ounce on the Comex division of the New York Mercantile Exchange. The exchange-traded funds that own bars of gold were up also.

streetTracks Gold Shares ( GLD) gained 2.3%, and iShares Comex Gold Trust ( IAU) was ahead by 2.2%.

"People didn't want to be short over the forthcoming long weekend," says Jeff Christian, managing director at New York-based specialty consulting firm CPM Group. The Nymex floor session will be closed Monday in observance of the Martin Luther King holiday.

Investors selling gold contracts or any other security short hope to buy them back at lower prices. When they close out their positions, a rally can ensue.

"Precious metals have been off, and those surveying the political situation don't see gold going much lower any time soon," adds Christian.

In particular, he cites the U.S. military action in Somalia and Bush's speech about the Iraq conflict as areas "of concern to foreign investors." Gold is frequently purchased as a safe harbor investment during wartime.

Also giving a boost to bullion was the greenback, which was trading lower despite yet more robust economic news. The value of gold tends to move up when the U.S. currency goes down in price.

The dollar was recently buying 120.36 yen, down slightly from 120.5 yen late Thursday. One euro would buy $1.2914, up from $1.2893 previously.

"The dollar has had one of the best weeks in a while, so short-term traders are booking their profits ahead of the long weekend," says Marc Chandler, a RealMoney.com contributor and a currency strategist at Brown Brothers Harriman in New York.

The fair economic news came in the form of better-than-expected retail sales. Other buoyant economic news came from the Economic Cycle Research Institute, which says its Weekly Leading Index logged a gain of 4% last week, up from 3.7% in the prior period.

That was the 10th consecutive increase, and it shows an accelerating trend, meaning that not only is the index advancing, but its rate of growth is getting faster. The rising indicator suggests continued strength in the U.S. economy, which should keep the dollar firm for at least a while.

Back in gold, chart watchers say the current action remains part of a broader sideways move.

"Gold is still in a long-term uptrend, but it's consolidating," says Adolfo Rueda, a technical analyst Natexis Bleichroeder in New York. He sees support at $550 and resistance at $650.

Turning to the precious metals patch, the Philadelphia Gold and Silver Sector Index gained 2.8%, buoyed by the firm metal price. Index component Kinross Gold ( KGC) did particularly well, up 4.5%.

Meanwhile in base metals, Comex copper for March delivery closed down 6 cents at $2.60 a pound as funds liquidated positions.

Shares of miner Freeport-McMoRan Copper & Gold ( FCX) climbed 2.3%, while those of Phelps Dodge ( PD) were ahead by 0.9%.