Gold prices fell for the third day in a row Wednesday as grim news from Europe offset mildly encouraging economic news from the U.S.

Despite European Central Bank buying of Italian bonds the interest rate on that nation's 10-year notes remained above seven percent.

In Britain, the central bank cut its projected growth rate to one percent through 2012, down from an August forecast of two percent growth, as a result of the Eurozone crisis.

In a question-and-answer session after the Bank of England issued its quarterly inflation report, the bank's governor said the Eurozone crisis would not be solved until it was widely understood that the problem is excessive debt, not a too-small money supply.

This is not a liquidity problem. This is about reducing the underlying macroeconomic imbalances, Mervyn King said.

What there needs to be is a credible plan under which the countries that have lost competitiveness can regain it so that markets can see that there is an end to the continuing increase in the external indebtedness in some of the countries, which is the major problem they face. Those current account deficits need to be turned into surpluses so they can support and finance the very large stock of external indebtedness that has built up.

In response to the grim European news, stocks fell and the dollar rose to a five-week high, tamping down gold by 1.6 percent and silver by 2.6 percent.

Later in the session, the U.S. Labor Department said U.S. consumer prices fell in October, its first such decline in four months, and the Federal Reserve said industrial output rebounded strongly last month.

That eased the pressure on stocks, curbed the dollar's ascent and helped precious metals pare early losses. A strong dollar makes gold less expensive for buyers who use non-U.S. currencies.

Gold for December delivery on the Comex fell $7.90 to settle at $1,774.30, while spot silver was up $1.98 to $1,773.80.

Silver for December delivery on the Comex declined 63 cents to $33.82, while spot silver was off 36 cents to $33.93.

Gold is finding technical support at $1,758 and resistance at $1,787.69.