Gold prices fell on Thursday as the dollar firmed while investors awaited US inflation data to gauge the Federal Reserve's monetary policy stance.

Spot gold was 0.6% lower at $1,877.40 per ounce by 1153 GMT, having earlier hit its lowest level since June 4 at $1,875.89.

US gold futures dropped 0.8% to $1,879.40 per ounce.

The dollar index ticked up, making gold less appealing for those holding other currencies.

"Further signs of inflationary pressures could sweeten appetite for gold ... However, upside gains may be capped by an appreciating dollar if inflation fears send US Treasury yields climbing," said Lukman Otunuga, senior research analyst at FXTM.

Higher yields threaten gold's appeal as an inflation hedge as they raise the opportunity cost of holding non interest-bearing bullion.

"There is a sense in the market that the Fed got the market under control saying that the inflation is transitory, so that's the whole focus right now, whether that can be achieved or not," said Ole Hansen, head of commodity strategy at Saxo Bank.

Economists polled by Reuters expect the highly anticipated May US consumer price index (CPI) data, due at 1230 GMT, to rise 0.4%, after CPI surged by the most in nearly 12 years in April.

But, current inflationary trends are unlikely to be "bullish" for gold and silver, Carsten Menke, analyst at Julius Baer said.

Menke added that current price hikes are transitory and tied to the economic recovery, likely signalling weaker gold prices ahead.

Weekly US jobless claims are also due at 1230 GMT.

The European Central Bank said it would continue to run its emergency bond purchases at a higher pace than at the beginning of the year, fearing that any retreat could sharply raise borrowing costs and smother a long delayed recovery.

Silver fell 0.4% to $27.64 per ounce, palladium dropped 0.5% to $2,764.95, while platinum was down 0.9% at $1,140.16.