09:26 AM EDT, 07/12/2024 (MT Newswires) -- Gold fell off a seven-week high early on Friday even as the dollar and yields weakened despite a report showing U.S. producer prices rose more than expected last month.

Gold for August delivery was last seen down US$18.70 to US$2.403.20 per ounce, after rising to the highest since May 22 on Thursday after the United States reported its Consumer Price Index (CPI) rose less than expected last month.

"Gold surged past $2,400 an ounce, nearing the record high set in May, and climbing by as much as 2.3% following softer-than-expected CPI data, which showed a 0.1% monthly decrease in consumer prices-the first negative reading in over four years. This fueled optimism that the Federal Reserve might soon start lowering interest rates," Saxo Bank noted.

The optimism over slowing inflation may be somewhat checked Friday after the U.S. Bureau of Labor Statistics said producer prices rose 0.2% in June, unchanged from May and above expectations for a 0.1% monthly rise, according to Marketwatch. Excluding volatile items, core PPI rose 0.4% in June after stagnating in May, while expectations called for a 0.2% monthly rise.

The report failed to support the dollar, which sagged on Thursday after the CPI data. The ICE dollar index was last seen down 0.14 points to 104.3.

Treasury yields also continued to weaken, bullish for gold since it pays no interest. The U.S. two-year note was last seen paying 4.493%, down 3.0 basis points to the lowest since March 8, while the yield on the 10-year note was down 0.8 basis points to 4.209%.