Gold prices eased on Monday, slipping from a more than five-month peak hit in the previous session, as cautious investors assessed if rising inflation would prompt a more aggressive response by central banks.
Spot gold fell 0.3% to $1,858.73 per ounce by 0444 GMT, while U.S. gold futures dropped 0.5% to $1,859.30.
"Until it breaks above $1,875-$1,880, gold should be capped by a stronger dollar, higher short-term U.S. Treasury yields and a possible move higher in longer-term yields if the Fed starts to hint they're going to raise rates sooner," said Stephen Innes, managing partner at SPI Asset Management.
The dollar index edged 0.1% lower but wasn't far off a 16-month high hit on Friday. A stronger dollar tends to weigh on bullion as it increases the metal's cost to buyers holding other currencies.
Minneapolis Federal Reserve Bank President Neel Kashkari said on Sunday he expected higher inflation over the next few months but warned that the U.S. central bank should not overreact to elevated inflation as it is likely to be temporary.
His remarks echoed comments from two European Central Bank policymakers on Friday that suggested the ECB should not withdraw stimulus too quickly despite inflation likely falling slower than previously thought.
"Inflation numbers have provided a boost to gold. However, prices could trend lower towards $1,700 over the course of 2022 as rising inflation will likely mean that central banks speed up the pace of monetary tightening," said Warren Patterson, head of commodities strategy at ING.
Interest rate hikes tend to reduce non-interest bearing gold's appeal as it raises the metal's opportunity cost.
Market participants await Tuesday's U.S. retail sales data for signs that higher inflation could weigh on consumption after consumer sentiment hit its lowest in a decade.
Spot silver fell 1.3% to $24.97 per ounce. Platinum fell 1.2% to $1,069.54 and palladium was down 1.2% to $2,084.50.