"U.S. Treasury yields at these levels are not pointing to a rosy economy," said Jonathan Jossen, COMEX gold options floor trader in New York. "Gold and silver should have more upside after they have spent a long time in the bear market."
U.S. gold futures for December delivery outperformed spot, settling up $4.30 an ounce at $1,234.30 in lighter-than-usual turnover.
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Spot gold was last down 0.3 percent at $1,232.75 an ounce after touching a four-week high of $1,237.90 an ounce.
The dollar recovered against a basket of major currencies after weak economic data out of the euro zone and United Kingdom underscored the relative health of the U.S. economy.
Last week, the greenback notched its biggest weekly loss in six months on growth concerns and worries that the U.S. Federal Reserve may wait longer to raise interest rate.
"It is still all about the U.S. dollar and the interest rate outlook," said George Gero, vice president at RBC Capital Markets.
Gold, priced in dollars, becomes more expensive for holders of other currencies when the U.S. currency strengthens.