Gold trades below $1,580 as US T-bond yields recover

• 10-year US Treasury bond gains nearly 2% on Monday.
• US Dollar Index recovers toward 98 following Friday's drop.
• Coming up: Markit and ISM Manufacturing PMI data from January.

The XAU/USD pair lost its traction on Monday as the precious metal seems to be having a tough time finding demand amid improving market sentiment. As of writing, the pair was trading at $1,578.20, losing 0.75%, or $11.50, on a daily basis. 

Despite a lack of fresh positive developments surrounding the coronavirus outbreak, China's willingness to support the economy to offset the negative impact helped the market sentiment improve slightly on Monday. Reflecting the shift in the sentiment, the 10-year US Treasury bond yield is adding nearly 2% and major European equity indexes are looking to end the day with modest gains.

Eyes on PMI data

In the meantime, the greenback is capitalizing on the broad-based selling pressure surrounding the major European currencies and allowing the bearish pressure on the pair to remain intact. 

Ahead of the IHS Markit's and the ISM's Manufacturing PMI data for January, the US Dollar Index is adding 0.4% on a daily basis at 97.75. Analysts expect the ISM Manufacturing PMI to improve to 48.5 in January from 47.2 to show a contraction in the sector's business activity at a softer pace.

In addition to these data, investors will be paying close attention to Wall Street's performance on Monday to see if risk appetite stays strong during the American session.

Technical levels to watch for