Strong dollar, inflation hammer gold

San Francisco (Oct 22  Gold prices pulled back Wednesday, with the yellow metal—often viewed as an inflation hedge—moving down after a report showed inflation remains in check.

Gold for December delivery GCZ4, -0.58% fell $6.20, or 0.5%, to settle $1,245.50 an ounce. The metal is pulling back after rising on Tuesday to levels last seen in early September, and some analysts suggest it’s just catching its breath after a solid advance.

“Gold ran into resistance near $1,255 and has dropped back in a normal trading correction,” said Colin Cieszynski, chief market strategist at CMC Markets, in a note on Wednesday.

A Labor Department report on Wednesday indicated that U.S. consumer prices rose slightly last month owing to higher costs for food and housing, but inflationary pressures continue to be held in check by falling energy expenses. The consumer-price index climbed a seasonally-adjusted 0.1% in September, meeting the consensus forecast from economists polled by MarketWatch.

The dollar’s gain on Wednesday also weighed on gold, as a key dollar index DXY, +0.39%  advanced 0.4%. A stronger greenback often hurts dollar-denominated commodity prices as it makes them more expensive to holders of other currencies.

On Tuesday, gold futures pushed higher for a second day in a row. Analysts have said the metal has been benefiting from a combination of global economic worries and overseas physical demand.

In other metals trading on Wednesday, December silver SIZ4, -2.13% lost 32 cents, or 1.8%, to $17.23 an ounce.

Source: MarketWatch