Gold erases losses as DXY struggles to extend gains

After rising for six straight days and gaining nearly $40 against the USD in the first half of the week, the precious metal gave back a portion of its earning on Thursday, with the XAU/USD pair dropping to $1250. However, the pair failed to extend the fall in the U.S. session and is now trading at $1254, still down 0.6% on the day.

Since the start of the week, gold's safe haven status allowed it to find demand as the political turmoil in the United States pushed the investors away from riskier assets. After recording their worst daily performance since September, major equity indexes in the U.S. are holding on to daily gains on Thursday, with the Dow Jones Industrial Average and the S&P 500 both adding 0.15% on the day.

Furthermore, the US Dollar Index is also correcting yesterday's heavy losses. Although the index failed to sustain its bullish momentum, it's still up 0.15% on the day, at 97.50, supported by the recent solid macroeconomic data from the U.S. However, it's difficult to say that the recent mood has changed in favor of the USD as the political turmoil in the U.S. is far from being resolved and James Comey's congressional testimony next week could stir the pot once again.

Technical outlook

The pair could face the immediate resistance at $1255 (50-DMA) ahead of $1265 (daily high) and $1271 (Apr. 30 high). To the downside, supports align at $1242 (20-DMA), $1231 (200-DMA) and $1217 (May 11 low).