Gold futures settled slightly down on Wednesday after data showing a bigger than expected increase in U.S. core inflation dimmed the prospects of the Federal Reserve cutting interest rates aggressively this year.

A slightly higher dollar weighed a bit on gold prices. The dollar index, which exhibited weakness during Asian and European sessions, edged higher to 101.82 in the New York session after the inflation data. The index was last seen trading at 101.70, up marginally from the previous close.

Gold futures for September ended down $0.20 at $2,512.10 an ounce.

Silver futures for September settled at $28.563 an ounce, gaining $0.306 or about 1.1%.

Copper futures for September climbed to $4.0835 per pound, gaining $0.0430 or about 1.1%.

Data from the Labor Department showed U.S. consumer price index rose by 0.2% in August, matching the uptick seen in July as well as economist estimates.

However, core consumer prices, which exclude food and energy prices, climbed by 0.3% in August after rising by 0.2% in July. Economists had expected core prices to rise by another 0.2%.

The Federal Reserve is still likely to lower interest rates next week, but the bigger than expected increase by core consumer prices is seen as reducing the chances the central bank lowers rates by 50 basis points.

Following the report, CME Group's FedWatch Tool is indicating an 83% chance of a quarter point rate cut and just a 17% chance of a half-point rate cut.

The producer price index reading and initial jobless claims figures due on Thursday may also influence the size and extent of the U.S. Fed rate cut.

The European Central Bank is expected to cut rates again on Thursday in a prelude to the Fed move.

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