Spot gold fell 0.2% to $1,748.10 per ounce by 10:24 a.m. EDT (1424 GMT). U.S. gold futures dropped 0.2% to $1,749.70.
Gold leaped 1.3% on Wednesday after data showed U.S. consumer price increases in July were in line with economists' estimates and down from June.
"The bulls have been able to stabilise gold prices after the recent sell-off and if prices can continue to trade sideways in the near-term, that would suggest that the recent spike lower is probably a near-term bottom," said Jim Wyckoff, senior analyst with Kitco Metals.
But, taking some of gold's shine away, the dollar firmed 0.1% against rivals while benchmark U.S. 10-year treasury yields rebounded on Thursday.
Market participants took stock of data that showed a drop in weekly jobless claims and U.S. producer prices in the 12 months through July jumping by a record 7.8%.
Also on investors' radar was U.S. President Joe Biden's $3.5 trillion budget proposals, which were passed in the Senate but faces a vote by the House of Representatives.
"Fiscal policies should work in tandem with monetary tapering to support gold because both suggest inflationary pressures ahead," Wyckoff said.
While gold is considered a hedge against higher inflation, it is highly sensitive to rising U.S. interest rates that increase the opportunity cost of holding non-yielding bullion.
Julius Baer analyst Carsten Menke, however, said that "given receding economic risks, especially with higher vaccination rates, there's no reason to own gold".
Menke attributed the metal's recent gains to improved speculative interest in the futures market.
Elsewhere, silver fell 1.6% to $23.14 per ounce, platinum was up 0.1% at $1,018.1 and palladium dropped 0.4% to $2,624.74.
(Reporting by Nakul Iyer and Arundhati Sarkar in Bengaluru, editing by Mark Heinrich)
By Nakul Iyer
