A report showing a jump in inflation supported gold prices Tuesday, partly offsetting the negative impact of a stronger dollar.
Gold pared early losses, closing down just 80 cents at $1,123 an ounce on the New York Mercantile Exchange, after earlier falling to as low as $1,112.
In the latest sign that the economy is strengthening, the government said Tuesday that wholesale inflation rose 1.8 percent last month, much more than expected. Core inflation, which strips out volatile food and energy costs, rose 0.5 percent, the biggest gain in a year.
The increase bodes well for gold, which is considered a safe place to park money during times of rising prices.
However the producer price report from November also supports the growing belief in the market that the Federal Reserve will raise interest rates sooner than expected in order to ward off inflation. That notion has boosted the dollar in recent weeks, hurting demand for gold and other commodities. Commodities are more attractive to foreign buyers when the dollar is weak.
As the Federal Reserve began its last policy meeting of the year, the dollar rallied to its highest level since early October. Worries over rising debt levels in countries that use the euro also boosted the greenback.
The ICE Futures U.S. dollar index, which measures the dollar against other major currencies, jumped 1 percent Tuesday. The index has risen 3 percent this month, potentially threatening an ongoing rally in gold. Gold has fallen 8.5 percent so far from a record high of $1,227.50 on Dec. 3.
Most analysts believe the dip in gold prices will be short-lived, saying investors have used the stronger dollar as an excuse to take some profits as the year comes to a close.
"I'm not surprised that after a really stellar year we're pulling back in the last month," said James Steel, an analyst with HSBC in New York.
Even with the recent pullback, gold is up 27 percent for the year. That compares with a 23 percent increase in the Standard & Poor's 500 index.
Silver and platinum also recovered from early losses on Wednesday. March silver futures rose 11.5 cents to $17.455 an ounce, after being down as much as 20.5 cents. January platinum added $5.50 to $1,452.50 an ounce, after falling to as low as $1,431.80. Palladium fell.
March copper futures lost 1.05 cents to $3.1415 a pound.
Elsewhere on the Nymex, oil prices broke a nine-day losing streak, rising after OPEC forecast that energy demand will rebound faster than previously thought.
The Organization of Petroleum Exporting Countries, which supplies about 35 percent of the world's oil, said it expected the world would consume 70,000 more barrels of crude next year than originally estimated.
Light, sweet crude for January delivery rallied $1.18 to settle at $70.69 a barrel.
After rising for much of this year on the back of a weaker dollar, oil prices have fallen in recent weeks as concerns about weak demand take the forefront. Prior to Tuesday, prices had fallen more than $10, or about 11 percent, since the beginning of the month.
Heating oil lost less than 1 cent to $1.9033 a gallon, while gasoline added 1.84 cents to settle at $1.8451 a gallon. Natural gas rose 19.1 cents to $5.523 per 1,000 cubic feet.
On the Chicago Board of Trade, March wheat futures slipped 6.75 cents to $5.3675 a bushel, while corn for March delivery shed a penny to $4.075 a bushel.
March soybeans inched up a quarter of a cent to $10.62 a bushel.
Cocoa, cotton and sugar fell, while coffee prices rose.