Gold drops to fresh five-day lows near $1,560 amid risk rally

• Wall Street's main indexes climb to fresh record highs.
• 10-year US Treasury bond yield pares early gains.
• US Dollar Index posts modest daily losses near 98.80.

The XAU/USD pair lost its traction in the second half of the day and touched its lowest level in five days at $1,562.40 as the upbeat market mood caused the precious metal to lose interest. As of writing, the pair was trading at 1,564.75, erasing 0.45% on a daily basis.

Global equity indexes rose on Tuesday boosted by heightened hopes of the coronavirus outbreak finally plateauing toward the end of the month. Reflecting the risk-on atmosphere, Wall Street's main indexes started the day in the positive territory and climbed to fresh record highs while the 10-year US Treasury bond yield erased early gains to turn positive on the day.

"China coronavirus outbreak may peak later this month and then plateau, based on the current model and trend," Chinese Government Medical Advisor Zhong Nanshan stated on Tuesday to trigger the risk rally.

USD weakens slightly on Tuesday

In the meantime, while testifying before the House Financial Services Committee, FOMC Chairman Powell reiterated that the current monetary policy stance was appropriate. "The Fed will respond accordingly if developments emerge to cause a material reassessment of the outlook," Powell added. These comments were largely ignored by the market participants and the US Dollar Index (DXY) struggled to push higher.

As of writing, the DXY was down 0.1% on the day at 98.76, helping the pair limit its losses for the time being. If the index stays in the negative territory by the end of the session, it will snap its six-day winning streak.

Technical levels to watch for