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Gold prices fell on Monday, dragged down by a firmer dollar, while investors readied for key U.S. inflation data and the Federal Reserve's rate-hike verdict due this week.

Spot gold slipped 0.5% to $1,786.95 per ounce, as of 0510 GMT. U.S. gold futures were down 0.7% at $1,798.40.

The dollar index rose 0.3%. A stronger greenback makes dollar-priced bullion more expensive for overseas buyers.

"It's a big week for markets with U.S. inflation and Fed meeting... We'll see lower levels of volatility and fickle price action as investors become wary of front-running the events," said Matt Simpson, senior market analyst at City Index.

Tuesday's U.S. Consumer Price Index (CPI) data and Fed's final meeting of 2022 scheduled on Dec. 13-14 will be keenly watched by investors.

Traders are pricing in a 93% chance of a 50-basis-point rate hike by the Fed.

"Gold could benefit if it a softer CPI as it would raise hopes of a less aggressive Fed... A slower (rate hike) trajectory should benefit gold and see it head for the $1,824 high," Simpson added.

Lower rates tend to boost gold's appeal as it decreases the opportunity cost of holding the non-yielding bullion.

U.S. producer prices rose slightly more than expected in November amid a jump in the costs of services, but the trend is moderating, with annual inflation at the factory gate posting its smallest increase in 1-1/2 years.

U.S. Treasury Secretary Janet Yellen on Sunday forecast a substantial reduction in U.S. inflation in 2023.

Additionally, the European Central Bank (ECB) and the Bank of England (BoE) are also set to announce rate hikes this week, as policymakers continue their battle against inflation.

Spot silver lost 0.8% to $23.29, platinum fell 1% to $1,011.88 and palladium ticked 0.8% lower to $1,935.23.