(Updates prices)

* Gold should trend towards $1,700/oz over 2022- analyst

* U.S. retail sales data due on Tuesday

Nov 15 (Reuters) - Gold prices edged lower on Monday, pulling back from a more than five-month peak hit in the previous session, as cautious investors assessed whether rising inflation would prompt a more aggressive response by central banks.

Spot gold fell 0.1% to $1,861.87 per ounce by 0818 GMT, while U.S. gold futures dropped 0.2% to $1,863.90.

"Until it breaks above $1,875-$1,880, gold should be capped by a stronger dollar, higher short-term U.S. Treasury yields and a possible move higher in longer-term yields if the Fed starts to hint they're going to raise rates sooner," said Stephen Innes, managing partner at SPI Asset Management.

The dollar index edged 0.1% lower, but wasn't far off a 16-month high hit on Friday. A stronger dollar increases gold's cost to buyers holding other currencies.

Minneapolis Federal Reserve Bank President Neel Kashkari said on Sunday he expected higher inflation over the next few months, but warned that the U.S. central bank should not overreact to elevated inflation as it is likely to be temporary.

"Inflation numbers have provided a boost to gold. However, prices could trend lower towards $1,700 over the course of 2022 as rising inflation will likely mean that central banks speed up the pace of monetary tightening," said Warren Patterson, head of commodities strategy at ING.

Interest rate hikes tend to reduce non-interest bearing gold's appeal as it raises the metal's opportunity cost.

Hareesh V, head of commodity research at Geojit Financial Services in Kochi, India, said the Fed was unlikely to taper aggressively for the time being given only a gradual recovery in the labour market, supporting gold.

Market participants await Tuesday's U.S. retail sales data, after consumer sentiment hit its lowest in a decade.

Spot silver fell 0.4% to $25.18 an ounce. Platinum dropped 0.5% to $1,077.29 and palladium was down 1% at $2,087.18. (Reporting by Nakul Iyer and Seher Dareen in Bengaluru; Editing by Uttaresh.V, Rashmi Aich and Shailesh Kuber)