Gold prices fell early on Friday, continuing to correct from Monday's record high, as the dollar rises and investors' risk appetite increases.

Gold for June delivery was last seen down US$39.70 to $3,308.90 per ounce, as the metal fails to retest the April 21 high of US$3,425.30 per ounce.

The drop comes as safe-haven demand falls, with investors returning to risky equities, with S&P 500 index rising for the past three days after U.S. President Donald Trump backed down from threats to fire Federal Reserve Chair Jerome Powell. Strong first-quarter results from index members are also buoying investors, with Google parent Alphabet (GOOGL) on Thursday reporting much better than expected earnings.

"Gold is heading for a weekly loss as it continues to consolidate ... An improved market risk sentiment may weigh on gold in the short term, without, in our opinion, damaging an overall positive outlook for bullion," Saxo Bank noted.

A recovering dollar is also weighing on the metal. The ICE dollar index, which earlier this week fell a three-year low of 98.28, was last seen up 0.21 points to 99.58.

Treasury yields fell early, with the U.S. two-year note last seen paying 3.797%, down 0.8 basis points, while the yield on the 10-year note was down 5.0 points to 4.275%.