Gold continued to decline for the second day on Tuesday after rising above $2,000 an ounce in the last session, as investors turned their attention from the banking crisis to the U.S. Federal Reserve's interest rate decision.
Spot gold was down 0.6% at $1,967.17 per ounce, as of 0912 GMT, while U.S. gold futures slipped 0.6% to $1,970.30.
The metal had hit $2,009.59 an ounce on Monday, its highest since March 2022, before pulling back to $1,978.71.
Bullion has gained over $100 after the collapse of U.S.-based Silicon Valley Bank earlier this month, as investors scrambled for the safe haven.
European shares rose nearly 1%, with banking stocks leading the recovery, following a raft of measures to stabilise the sector, while investors hoped for less aggressive moves by the Fed.
There is some caution in the market ahead of the Fed rate decision, said Michael Hewson, chief market analyst at CMC Markets.
"A dovish hike could provide the catalyst for further gains towards $2,000 an ounce, but there would need to be clear evidence that hikes were at an end for (gold) prices to push into towards record highs."
According to the CME FedWatch tool, markets are pricing in a 16.6% chance that the Fed will stand pat at the end of its March 21-22 meeting, with a 83.4% chance of a 25 basis points (bps) hike.
Lower interest rates make non-yielding bullion more attractive by reducing the opportunity cost of holding it.
"The precious metal is set to glow amid the fragile sentiment with expectations around a less aggressive Federal Reserve limiting downside losses," said Lukman Otunuga, senior research analyst at FXTM in a note.
"Looking at the technical picture, gold could experience a technical pullback towards $1,955 before bulls take further action."
The dollar rose 0.1%, making bullion less attractive for overseas buyers. Benchmark U.S. 10-year Treasury yields also ticked up.
Spot silver fell 0.6% to $22.39 per ounce, platinum lost 0.2% at $986.77 and palladium was 0.2% lower at $1,417.62.
(Reporting by Ashitha Shivaprasad and Arundhati Sarkar in Bengaluru; Editing by Varun H K)