Gold falls on stronger dollar ahead of U.S. inflation data

* Focus on U.S. inflation data on Thursday

* Gold could benefit from cryptocurrency drop, analyst says (Updates prices)

By Nakul Iyer

June 8 (Reuters) - Gold dropped on Tuesday as a firmer dollar countered a slip in U.S. Treasury yields as investors looked ahead to U.S. inflation data that could influence the Federal Reserve's timeline to taper monetary support.

Spot gold XAU= was down 0.4% to $1,892.33 per ounce by 1:42 p.m. EDT (1742 GMT) while U.S. gold futures GCv1 settled down 0.2% at $1,894.40.

The dollar index .DXY rose 0.2%, lowering gold's appeal for holders of other currencies, while benchmark U.S. Treasuries fell to a one-month trough. US10YT=RR

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

Analysts noted that U.S. consumer price index data due on Thursday could spark fears that the Fed will begin a move to scale back its wide-open monetary policy, driving gold prices lower.

U.S. Treasury Secretary Janet Yellen also suggested 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 U.S. job market and its recovery.

Societe Generale, however, said gold prices could reach $2,000 by the end of 2021.

"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.

Gold's appeal as an inflation hedge could have also been bolstered by the recent declines in cryptocurrencies as it has brought some investors back to the safe-haven metal, said Michael Matousek, head trader at U.S. Global Investors.

Meanwhile, silver XAG= fell 1% to $27.59, palladium XPD= dropped about 1% to $2,806.70, and platinum XPT= slipped 1.2% to $1,159.24.

Reporting by Nakul Iyer in Bengaluru; Editing by Jonathan Oatis, David Gregorio and Paul Simao

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