Gold futures slipped anew Monday, as Secretary of State Condoleezza Rice arrived in the Middle East in the first American on-the-ground diplomatic effort to resolve the conflict between Lebanon and Israel

"People are a little enthusiastic about some kind of a ceasefire," said Charles Nedoss, senior account manager at Peak Trading Group in Chicago.

Gold for August delivery closed down $7 at $613.20 an ounce on the New York Mercantile Exchange. The metal lost 7.2% last week.

"Gold's taking a breather and some of the risk premium is out of it," Nedoss said.

However, Nedoss said that he's skeptical about the possibility of a ceasefire involving Israeli forces and Hezbollah in the near term: "Sitting down with the Lebanese government and sitting down with Hezbollah are two different things."

Rice's diplomatic trip to the Middle East Monday has detracted from gold's safe-haven allure. Trading in metals has been very volatile lately, marked by big price swings in both directions.

Other metals prices were mixed. September silver added 7.50 cents at $10.920 an ounce, September copper edged up 5.90 cents at $3.382 a pound and September palladium rose $4.25 at $316.05 an ounce. October platinum declined $11.20 at $1,209.30 an ounce.

Crude-oil futures reversed early losses to close higher, buoyed by sharp gains in natural gas as triple-digit temperatures across much of the U.S. raised expectations for energy demand.

Crude for September delivery closed up 62 cents at $75.05 a barrel on the New York Mercantile Exchange.

Contributing to the weakness in gold prices, the dollar rose against major currencies on Monday.

The dollar and Mideast diplomacy are pressuring gold, said James Moore of TheBullionDesk.com, adding that psychological and physical buying interest should support gold around $600.

However, he noted that speculation surrounding prospects for settling the hostilities in southern Lebanon "appears to be generating a more bearish outlook" over the short term. As a result, gold could retreat back to $585 "at some point this week," Moore said.

Fierce fighting between Israel and Hezbollah militants continued Monday, as Israeli ground forces moved deeper into Lebanon. About 380 Lebanese citizens, mostly civilians, and about 37 Israelis have been killed since the conflict broke out on July 12, according to reports.

Against the backdrop of violence, Rice unexpectedly visited Beirut on Monday where she met with Lebanon's prime minister in a demonstration of support for Lebanese democracy, according to reports.

Rice is in the region to try to resolve the conflict, even though both she and President Bush have ruled out negotiating an immediate ceasefire and have insisted that Hezbollah's control of southern Lebanon must end.

During her Mideast trip, Rice will also visit Israel and then a high-level conference in Rome for diplomatic talks.

"Gold continues to frustrate those who are looking to it to be the beacon of safety in a world gone violent," said Jon Nadler, analyst at Kitco.com. "Now that interest rates and conflict premiums have been fully digested, the bullion market is working its way to a level it believes to be in equilibrium."

Indeed, there's risk that gold might drop back to around $500 an ounce, Nadler said, adding that the prospects of gold trading at $690 an ounce – what he called the necessary level to rekindle the bull phase of this spring – are dim.

At the same time, Nadler said that the jewelry trade should make a decent comeback after the August holidays. Also, "we still place very little faith in immediate and lasting stability returning to the troubled region that the Middle East remains," Nadler said.

On the supply side, gold inventories were down by 390 troy ounces at 8.10 million troy ounces as of late Friday, according to Nymex data. Silver and copper supplies were unchanged, at 102.9 million troy ounces and at 7,144 short tons, respectively.