The dollar surrendered nearly a yen to 120.83 yen on Yugoslavia's offer of a unilateral ceasefire in Kosovo, although the US and Britain dismissed it as a diplomatic ploy.

COMEX June gold settled at $281.80 an ounce, up $1.50, after trading between $280.00 and $282.80 an ounce. Spot bullion was quoted at $278.50/9.00 an ounce, compared with the late London fix at $278.50 an ounce, and last Thursday's New York close at $280.20/70.

"The ceasefire proposal seemed to weaken the dollar, which got some of the gold traders running for cover," one commission house analyst said.Open interest soared 8,720 lots in Monday's trading, lending credence to the theory that life-of-contract low was driven by fresh fund selling.

The net short speculative position as of March 23 was already a whopping 55,893 lots, according to the most recent CFTC Commitmentsof Traders report, compared with a 5,687-lot net long position two weeks before.An expected increase in that short position has some traders primed for a short-covering rally.

"Around midday, the trade came in and bid the market up," one floor trader said. "They were anticipating a short-covering rally, and if we can hold these levels, we may get one."

Rumours of Romanian central bank sales were dismissed in the market. The Romanian National Bank denied such rumours three weeks ago. Romania is believed to hold approximately three million ounces, which isn't viewed as altering the market fundamentals much.

Technically, June gold is facing a wall of resistance at $283.10 an ounce, followed by $284.00, and $287.70 an ounce in the long term.COMEX May silver ended $4.958 an ounce, up 3.0 cents, trading in a range between $4.885 and $4.965 an ounce.

Spot bullion was quoted at $4.96/98 an ounce, compared with the fix at $4.945 and Thursday's New York close at $5.02/05 an ounce.

May silver made a freshthree-and-a-half-month low early, but rallied back on dealer buying, creating a possible reversal signal. Traders had been expecting support from the physical market below $5.00 an ounce. Longer-term resistance is pegged at $5.18 an ounce.