Gold prices drew support from a subdued greenback to edge higher on Thursday, though elevated Treasury yields and caution in the run-up to a key U.S. inflation data and Federal Reserve policy meeting capped gains of the non-yielding asset.

Spot gold was up 0.2% at $1,785.78 per ounce, as of 0516 GMT. U.S. gold futures were steady at $1,786.30.

The dollar index was tepid, but hovered near its lowest level since Dec. 2 hit in the previous session, making bullion cheaper for holders of other currencies. 

Bullion prices have flitted in the range of roughly $1,760 to $1,790 after last month's fall below the key $1,800 mark as investors cautiously assess the pace at which the U.S. Fed is likely to accelerate its stimulus tapering.

Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of bullion, which bears no interest.

"An accelerated taper is probably already expected by the gold market, so the vulnerability is if the FOMC's tapering announcement surprises or exceeds expectations," said Nicholas Frappell, a global general manager at ABC Bullion, referring to the Federal Open Market Committee.

"Although the physical outlook for gold is good and lends some support to prices, we're also seeing a return to risk sentiment in financial markets, with investors more comfortable with the Omicron variant, which has dimmed interest in gold."

Limiting bullion's appeal, benchmark 10-year Treasury yields were hovering close to their highest level since Nov. 29 scaled on Wednesday.

Investors' focus now turns to Friday's U.S. Consumer Price Index (CPI) report, which could influence the Fed's policy decision in its Dec. 14-15 policy meeting.

Spot silver rose 0.1% to $22.43 an ounce. Platinum dropped 0.1% to $955.98, while palladium rose 0.7% to $1,862.90.

(Reporting by Nakul Iyer in Bengaluru; Editing by Sherry Jacob-Phillips) ((nakul.iyer@thomsonreuters.com; Within U.S. +1 646 223 8780, Outside U.S. +91 80 6749 0417; Reuters Messaging: nakul.iyer.thomsonreuters.com@reuters.net))