Gold struggles to extend gains above $1320 amid improving market sentiment

Despite the broad-based USD weakness, the XAU/USD pair is having a difficult time extending its gains on Thursday. As of writing, the pair was trading at $1321.25, adding 0.35% on the day.

Earlier today, the data released by the U.S. Bureau of Labor Statistics showed that the Producer Price Index for final demand dropped 0.1% in December, pulling down the annual rate to 2.6% from 3.1%. Moreover, weekly initial jobless claims came in at 261,000, worse than the market estimate of 245,000. Pressured by the disappointing data, the US Dollar Index slumped below the 92 mark and stretched its losses before finding a support ahead of 91.50. At the moment, the DXY was at 91.60, losing 0.56% on the day.

However, the traditional safe-haven gold failed to take advantage of the USD weakness as the upbeat performance of major equity indexes in the U.S. increased the risk appetite in the session. Following two straight daily negative closes, Wall Street opened higher on Thursday, and the Dow Jones Industrial Average and the S&P 500 were adding 0.38% and 0.22% respectively at the time of writing. A positive daily close could help the Asian indices recover their losses on Friday and continue to cap the pair's gains.

Later in the session, NY Fed President William Dudley's speech will be looked upon for fresh impetus.

Technical outlook

The CCI indicator on the daily chart stays near the 100 mark, suggesting that buyers are still in control of the price action. The initial hurdle for the pair could be seen at $1327 (Jan. 10 high) ahead of $1334 (Sep. 14 high) and $1344 (Sep. 5 high). On the downside, supports are located at $1300 (psychological level), $1294 (Dec. 29 low) and $1286 (Dec. 28 low).