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Gold futures settle higher, outperforms spot prices

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Gold settled higher on Tuesday as sliding crude oil prices and a dollar rebound prompted the bullion market to take a breather following its recent rally.

The energy market slumped further on Tuesday, with U.S. and Brent crude futures both falling more than 4 percent after the West's energy watchdog cut its estimates for oil demand this year and next.

Anxieties about a slowing global economy also sent U.S. 30-year bond yields below 3 percent for the first time since May 2013, while benchmark 10-year yields fell to a 16-month low of 2.18 percent.

"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.

Read MoreOil slide wipes out stock market gains

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.