Gold prices slipped nearly 2% as the dollar rebounded and some investors locked in profits after bullion scaled a nine-month peak on dovish remarks from Federal Reserve Chair Jerome Powell.
Spot gold dipped 1.91% to $1,9153.09 per ounce, having hit its highest since April 2022 earlier in the session.
U.S. gold futures settled down 0.77% at $1,927.8.
While the underlying support to the gold market remains strong, the slight pullback in the market could be due to some profit-taking ahead of tomorrow's monthly U.S. jobs data, said David Meger, director of metals trading at High Ridge Futures.
The U.S. central bank on Wednesday raised benchmark borrowing costs by 25 basis points (bps) to a range of 4.5% to 4.75%, its smallest hike so far in an 11-month tightening cycle.
Meanwhile, Powell warned about further monetary policy tightening as inflation remained too high, but noted that the progress on disinflation was in its early stages.
"Powell was not nearly as hawkish as he had been in recent FOMC press conferences and left the door open to a Fed "pivot" sooner rather than later," said Jim Wyckoff, senior analyst at Kitco Metals in a note.
Gold tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.
Data showed the number of Americans filing new claims for unemployment benefits dropped to a nine-month low last week as the labour market remains resilient despite higher borrowing costs.
Focus now shifts to January's U.S. nonfarm payrolls report due on Friday.
Additionally both the Bank of England and the European Central Bank raised interest rates by 50 bps.
Elsewhere, spot silver fell 2.16% to $23.4624 per ounce, platinum jumped 3.16% to $1,033.4, and palladium was up 0.64% to $1,643.00.