Gold starts rebounding from daily rally as sentiment improves, and trades above $1600

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  • The People's Bank of China (PBoC) says the impact of the coronavirus on the economy will be limited.
  • The 10-year US Treasury yield erased early gains.
  • The US dollar index remains near 99.50 ahead of the FOMC meeting minutes.

The XAU/USD pair rose to its highest level since Jan. 8 at $1,611.07, and is close to a seven-year high. However, with the market sentiment improving ahead of the American session, the pair erased part of its earlier gains and was last seen trading at $1,606.90, with it continuing to gain 0.33% on the day.

The People's Bank of China downplays the impact of the Corona virus

In its report on monetary policy implementation for the fourth quarter, the People's Bank of China (PBoC) said that the magnitude and duration of the impact of the coronavirus outbreak on the economy is expected to be limited. The People's Bank of China added that "the fundamentals of China's economy have not changed."

Reflecting a positive shift in risk perception, the US 10-year Treasury yield erased its early losses to flat on the day, and major European stock indices rose.

On the other hand, it seems that the broad strength of the US dollar is making it difficult for the pair to rise. The US dollar index, which measures the dollar's performance against a basket of six major currencies, remains at multi-month highs near 99.50 before the FOMC releases the minutes of its January monetary policy meeting later in the day.

In the meantime, markets will be paying close attention to Wall Street's performance to see if risk flows begin to dominate the markets in the second half of the day.

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