Spot gold fell 0.3% to $1,914.16 per ounce by 1:47 p.m. ET (1847 GMT), after hitting its highest since late April at $1,929 in the session.
U.S. gold futures fell 0.3% to $1,917.30.
The dollar edged up 0.2%, making gold a less attractive bet for those holding other currencies.
"The fact that gold has managed to surpass $1,915 in the last few days was a positive signal, and now gold is briefly consolidating," said Carlo Alberto De Casa, an external analyst at Kinesis Money, adding the main trend remains positive for bullion as investors see smaller rate hikes from the Fed.
After sharp rate hikes in 2022, markets are now pricing in a 91% chance of a smaller 25-basis-point increase when the Fed announces its policy decision in February, after data last week showed U.S consumer prices unexpectedly fell in December.
Gold, which pays no interest, tends to benefit when interest rates are low as it reduces the opportunity cost of holding bullion.
Buying in top-consumer China normally picks up ahead of the Lunar New Year holidays, which run from Jan. 21. [GOL/AS]
"Gold prices still look set to retest the $2,000 an ounce level in the coming weeks," Michael Hewson, chief markets analyst at CMC Markets, said in a note.
Spot silver was down 0.1% to $24.22 per ounce after hitting a near two-week peak.
"The growing adoption of green energy sources continues to favour fabrication demand for silver... Silver bar and coin demand continued to be high," ANZ said in a note.
Platinum fell 0.2% to $1,062.47 while palladium dipped nearly 2% to $1,754.64.
(Reporting by Kavya Guduru and Seher Dareen in Bengaluru; Editing by Jon Boyle, Jason Neely and Andrea Ricci)
By Kavya Guduru
