Gold fell over 1pc on Friday as the dollar firmed and investors took profits after prices briefly surpassed $1,450 to hit a six-year peak on dovish signals from the US Federal Reserve and is still on course for a second week of gains.
Spot gold was down 1.5pc at $1,424.66 per ounce at 12:05 p.m. EDT (1605 GMT), having touched its highest since early May 2013 at $1,452.60.
Prices have risen about 3pc in the past two days and by about 0.6pc so far this week on increased expectations for a rate hike by the Fed at its month-end meeting.
US gold futures slipped 0.2pc to $1,425.70 per ounce.
"Speculators and traders are taking some profits off the table after the good gains we had in the past two days. Also, there is always a little bit of pressure on gold when the dollar is up," said Michael Matousek, head trader at US Global Investors.
The dollar was about 0.4pc stronger against a basket of currencies, recovering from a sharp fall triggered by dovish comments from Fed policymakers.
On Thursday, New York Fed President John Williams said policymakers cannot wait for economic disaster to hit before adding stimulus, while Fed Vice Chair Richard Clarida said policymakers might need to act early to stimulate the economy as an insurance policy against rising risks.
"Gold is still looking good. The interest rates and dollar environment, uncertainties over the US-China trade war and now the geopolitical situation being the icing on the cake; all of this has created a very supportive environment for gold," said Mitsubishi analyst Jonathan Butler.
The United States said its Navy had destroyed an Iranian drone in the Strait of Hormuz, while Iran said all its drones had returned to base safely and there was no sign of major escalation in the Gulf.
"With any (geo-political) tensions, we generally have incremental buying for gold. But in today's price action that is not happening or rather, it is being overpowered" by profit taking, Matousek added.
Elsewhere, silver slipped 1.3pc to $16.13 per ounce, after surging to its highest level in more than a year, but was on track for its best week since July 2016, having gained about 6pc.
"There is still a good level of demand for silver at the moment with some investors speculating that the gold/silver ratio could fall further, and that a silver trade could potentially allow them to secure more gold in the future," said See Hong Kang, customer service manager at BullionStar Singapore.
Platinum dipped 0.3pc to $846.91 per ounce, after hitting a two-month high, while palladium fell 1.2pc to $1,507.44 per ounce.
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