Gold futures settled higher on Tuesday, supported by a weak dollar, and on rising tensions in the Middle East. Reports about China's extensive drills around Taiwan contributed as well to the increased demand for the safe-haven yellow metal.

Investors also awaited the European Central Bank's monetary policy announcement, due this week.

The dollar index, which dropped to 103.03 in the New York session, recovered gradually and was last seen at 103.30, its previous close.

Gold futures for October ended higher by $13.60 or about 0.51% at $2,661.40 an ounce.

Silver futures for October closed up $0.444 or about 1.43% at $31.527 an ounce, while Copper futures for October dropped to $4.2990 per pound, down $0.0645 or about 1.48% from the previous close.

In economic news, the Federal Reserve Bank of New York released a report showing regional manufacturing activity has returned to contraction in the month of October.

The New York Fed said its general business conditions index tumbled to a negative 11.9 in October from a positive 11.5 in September, with a negative reading indicating contraction. Economists had expected the index to decrease to a positive 2.3.

Despite the downturn in October, the New York Fed said optimism about the six-month outlook grew strongly, with the index for future business activity jumping to a multi-year high of 38.7 in October from 30.6 in September.

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