Spot gold was down 0.4% at $1,986.40 per ounce at 0707 GMT, after two sessions of sharp gains. U.S. gold futures also fell 0.4% to $1,988.90.
Non-yielding bullion, which becomes more attractive in a low-interest-rate environment, gained 2% after the Federal Reserve signalled it might pause further rate increases after the recent collapse of two U.S. banks, and pointed to just one more rate hike this year.
"However, the Fed also mentioned it would not look to cut interest rates this year," said Brian Lan, managing director at Singapore-based dealer GoldSilver Central.
Lan noted some profit-taking at play, and added, "gold prices would look to consolidate, unless there's any big news."
The dollar index edged 0.1% higher, making bullion expensive for overseas buyers.
The Bank of England on Thursday raised interest rates for the 11th time in a row. The Swiss National Bank raised rates by 50 basis points and said UBS's takeover of Credit Suisse had averted a financial disaster.
"The key focus is still on the banking crisis in the U.S., they're looking at whether there's further contagion to that effect," GoldSilver's Lan said.
Gold shot over the $2,000-level to a one-year peak earlier this week on safe-haven demand, but has since pulled back from those levels, although financial system uncertainties remain.
U.S. Treasury Secretary Janet Yellen on Thursday sought to reassure jittery investors that American bank deposits were safe and promised policymakers had more firepower to battle any crisis.
"An increase in net long positions by speculators has been driven by both new longs and short covering. The inflows into gold-backed ETFs have risen sharply in recent weeks," ANZ said in a note.
Spot silver fell 0.4% to $23.03 per ounce, while platinum inched up 0.1% to $985.45, while palladium dropped 0.9% to $1,418.39.
(Reporting by Kavya Guduru in Bengaluru; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)
By Kavya Guduru
