Spot gold prices dipped ahead of the US open on Monday, slipping $2.50 to hit $662 at lunchtime in London.
The dip was slightly exaggerated versus Sterling as the British currency hit a two-month high on the foreign exchanges.
Driven by expectations that the Bank of England will hike UK interest rates soon, the Pound rose to $1.974.
By 13:30 BST, gold for British investors had lost 1% to trade at £334.80 per ounce.
Gold traders are now watching for the US Institute of Supply Managers index, due at 10am Eastern Time (15:00 BST). (Click here for what the slowing US economy could mean for gold prices...)
"It's apparent that no one wants to be short of gold whilst the Iranian hostage situation remains unresolved," says Investec Australia today.
"Britain [is] urging the European Union to help isolate Iran at a meeting of EU ministers."
For French and German buyers the metal dipped more slowly on Monday, falling just 0.5% to €497 after the Euro currency itself slipped on weak manufacturing data.
Tehran claimed at the weekend that all 15 British service staff it seized in the northern Gulf last week have now confessed they had strayed into Iranian waters.
Two hundred Iranians threw firecrackers and bricks at the British Embassy in Tehran, meantime, protesting at the group's apparently "illegal" entry into Iranian territory.
But any idea that gold's "safe haven" status will send it higher on such news has once again been disappointed.
Gold hit its all-time highs above $850 per ounce during the US-Iranian hostage crisis of early 1980. Since then, however, geopolitical tensions have failed to drive investors into the metal.
"Once again a failure to break into the next band above $670 leaves us thinking gold is looking heavy at these prices," says Investec.
"[It's] likely to sell off if Iran gives in to pressure."
Overnight in Tokyo, gold futures for Feb. '08 rose to the equivalent of $670.82 per ounce.
"Gold is waiting to break the trading range it's in now without much news," reckons Nobito Kaneda, a precious metals trader at Sojitz Corp.
US crude oil futures for May delivery dipped 0.2% to $65.74 per barrel during the electronic.
Meantime in the physical gold market, "it looks like people are reluctant to take fresh positions," according to a Singapore scrap dealer today.
"Indonesia remains a seller at this time. India and Thailand are buying but the amount is quite small." (For more on the Indian market, click here now...)
Last month, however, saw much lower supplies of gold scrap from the Chinese market, reported Heraeus, the giant German refinery group, on Friday.
"Retail investors in Germany were in recent days attracted by the increased media presence of the yellow metal," the firm's latest weekly report goes on.
"We have seen more interest for our investment bars, mostly for the bigger ones, but also for the smaller sizes between 5 and 50 gram."
Heraeus also reports growing demand for investment gold from China and Hong Kong, picking up from the start of the New Year's holiday in Feb.
"In the South of China, in Guangzhou," reports Julian Phillips of the GoldForecaster, "retail sales of gold coins and gold products have reached 7.82 tonnes since February.
"That would equate to 94 tonnes per annum."
For the full story on China's growing appetite for gold – and what it means for global prices – click here now...