Gold dropped on Tuesday as a firmer dollar countered a slip in US Treasury yields, as investors looked ahead to U.S inflation data likely to have a bearing on the Federal Reserve's timeline to taper its monetary support.

Spot gold eased 0.8% to $1,883.90 per ounce by 9:57 a.m. EDT (1357 GMT), while US gold futures fell 0.2% to $1,895.60.

The dollar index strengthened 0.2%, lowering gold's appeal for other currency holders, while benchmark Treasuries fell to a one-month trough.

"It's a tug of war between bulls and bears (for gold) at the 1,900 level," Phillip Streible, chief market strategist at Blue Line Futures in Chicago, said, noting that declining bond yields are the "best" near-term tailwind, while the strengthening dollar and equities are headwinds.

Investors are looking forward to US consumer price index data due Thursday.

Analysts noted that higher inflation data could spark some fears over the Fed tapering its expansionary monetary policy and drive gold prices lower.

US Treasury Secretary Janet Yellen also suggested over the weekend that a slightly higher interest rate environment "would actually be a plus for society's point of view and the Fed's point of view".

But Streible said that in the long term Fed policy was more likely to be shaped by the state of the US job market and its recovery.

Indicative of sentiment, holdings of the largest gold-backed exchange-traded fund, the SPDR Gold Trust GLD, fell 0.6% on Monday from Friday.

Societe Generale, however, said gold prices could reach $2,000 by the end of the year.

"The reflation theme continues to include gold and that remains the one factor that leads us to maintain our generally positive outlook for 2021," the bank said in a note.

Meanwhile, silver fell 1.2% to $27.53, palladium dropped 1.6% to $2,789.25, and platinum slipped 1.6% to $1,153.79.