11.07.201914:39:00UTC+00Gold Retreats After Inflation Data, Settles Lower

Gold prices retreated after early gains on Thursday, as hopes about any steep cut in U.S. interest rates faded after data showed an unexpected increase in consumer price inflation in the month of June.

The U.S. dollar pared early losses and moved towards the flat line, thanks to the data on inflation. The dollar index, which dropped to a low of 96.80, briefly moved past the unchanged line to 97.15 and was last seen at 97.08.

Gold futures for August settled lower by $5.80 or about 0.4%, at $1,406.70 an ounce, well off the day's high of $1,429.40 an ounce.

On Wednesday, gold futures for August surged up $12, or about 0.9%, to $1,412.50 an ounce, the highest settlement in a week.

Silver futures for September ended down $0.080, at $15.146 an ounce, while Copper futures for September settled at $2.6875 per pound, down $0.0065 from previous close.

The Labor Department's report said a steep drop in gas prices was offset by an increase in the cost of shelter.

The report said its consumer price index inched up by 0.1% in June, matching the slight increase seen in May. Economists had expected consumer prices to come in unchanged.

The unexpected uptick in consumer prices came even though energy prices tumbled by 2.3% in June after falling by 0.6% in May. Gas prices plunged by 3.6%.

Excluding food and energy prices, core consumer prices rose by 0.3% in June after inching up by 0.1% for four consecutive months. Core prices had been expected to edge up by 0.2%.

Shelter costs rose 0.3%, leading core prices higher, while prices for apparel, used cars and trucks, and household furnishings and operations also showed notable increases.

Despite the unexpected monthly increase, the Labor Department said the annual rate of consumer price growth slowed to 1.6% in June from 1.8% in May.

Another report from the Labor Department showed first-time claims for U.S. unemployment benefits unexpectedly fell in the week ended July 6th, dropping to 209,000, a decrease of 13,000 from the previous week's revised level of 222,000.

Economists had expected jobless claims to inch up to 223,000 from the 221,000 originally reported for the previous week.