Expectations of rising interest rates tend to lift bond yields, reducing the appeal of holding non-yielding bullion while at the same time boosting the dollar, in which gold is priced.
"It all depends on the direction of the dollar and our forex strategists expect a dollar rebound as a result of rate hikes so gold should pare some of its gains," said Commerzbank analyst Carsten Fritsch.
The Fed should raise interest rates three to four times in both 2018 and 2019, Cleveland Fed President Loretta Mester said on Thursday, a pace that is a bit faster than many of her fellow policymakers prefer.
"The overall run in gold has been overdone. The overall weakness in U.S. dollar is over ... I can't be more cautious on gold prices at the moment," said Mark To, head of research at Hong Kong's Wing Fung Financial Group. "The fundamentals remain the same with the large trading range remaining intact at $1,200 to $1,400, with no major change in global political tensions or rate hike outlook."
Spot gold is still targeting $1,311 per ounce, as suggested according to Reuters technical analyst Wang Tao.
Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 1.42 percent to 840.76 tonnes on Thursday from Wednesday.
Silver advanced 0.55 percent to $17.023 per ounce, while palladium gained 0.27 percent to $1,101.72, but both metals, like gold, were set for their first weekly drop in six.
Platinum climbed 1.21 percent to $1,012.50, having hit its highest since last September at $1,014.50, as it headed for its sixth weekly gain.