Spot gold fell 0.4 percent to $2,013.13 per ounce by 0701 GMT, after hitting its highest since March 2022 on Wednesday. US gold futures dipped 0.2 percent to $2,030.70.

The dollar index edged 0.1 percent higher, making bullion expensive for overseas buyers.

"This is a market due for some technical correction because the rally was very sharp," said Ajay Kedia, director at Kedia Commodities in Mumbai.

The economic data points this week were major components supporting gold prices, he added, while also noting some profit-booking ahead of the Good Friday holiday.

Bullion has gained about 2.3 percent so far this week, after a surprise oil output cut by OPEC+ and weak US economic data over the week added to fears of an economic slowdown and sent the yellow metal soaring above $2,000.

Wednesday's data showed the US services sector slowed more than expected in March. Separate data showed private sector job ads fell well short of expectations.

Investors now await Friday's non-farm payrolls report for March.

While gold is traditionally considered a hedge against inflation and economic uncertainties, higher interest rates dim non-yielding bullion's appeal.

Markets see a 59 percent chance of the Fed standing pat on interest rates in May, according to CME's FedWatch tool. Cleveland Federal Reserve Bank President Loretta Mester said it was too early to know if the Fed would need to raise interest rates at its May policy meeting.

"The gold trade is getting a bit overcrowded but the macro backdrop still strongly remains firmly in its favor," Edward Moya, a senior market analyst at OANDA, said in a note, adding that gold's immediate resistance is at the $2,050 level. Spot silver fell 0.6 percent to $24.82 per ounce, platinum gained 0.8 percent to $1,005.01, while palladium edged 0.1 percent lower to $1,427.74.