Gold futures on the COMEX Division of the New York Mercantile Exchange continued to rally Wednesday as traders saw potential for inflation in a U.S. government report, while a weaker U.S. dollar also kept a floor under prices.

The most active gold contract for February delivery rose 4.3 dollars, or 0.3 percent, to 1,659.9 dollars per ounce.

U.S. wholesale prices fell slightly in December, pulled down by drops in energy and food costs, the U.S. government said Wednesday. But the measure of inflation rose more than expected.

One trader said gold got a boost after the dollar came under pressure from an unexpected decline in wholesale prices, as the slowdown in overall costs may give the Federal Reserve more flexibility to deploy a new round of economic stimulus measures, increasing the appeal of gold as an alternative asset.

But the precious metal failed to hold on to its all-day gains and gave back part of them, as some traders chose to lock in some profits, after the metal jumped 1.5 percent in the previous session.

Silver for March delivery added 40.8 cents, or 1.4 percent, to 30.543 dollars per ounce. Platinum for April delivery dipped 3.4 dollars, or 0.2 percent, to 1,525.3 dollars per ounce.