Gold rises above $1290 as market sentiment sours

• Disappointing earnings figures weigh on the market sentiment.
• US Dollar Index stays in positive territory.
• Eyes on Wall Street opening bell.

After dropping to a daily low near $1287, the XAU/USD pair took back its daily losses and rose above the $1290 handle as the precious metal gathered some strength amid fresh risk-off flows. As of writing, the pair was virtually unchanged on the day at $1291.

Although news of China introducing new measures to stimulate the economy allowed markets to start the day in a positive mood, a sharp sell-off witnessed in financial shares in Europe weighed on the sentiment. Major Italian banks UBI Banca lost nearly 10% after reports of ECB telling lenders to cover all of their NPLs in seven years. Additionally, JP Morgan's Q4 earnings figures fell short of market expectations and forced the S&P 500 Futures to erase almost all of its daily gains.

Meanwhile, with risk-sensitive and European currencies struggling to find demand in the second half of the day, the greenback gathered strength and the US Dollar Index edged higher toward the 96 handle to make it difficult for the XAU/USD pair to preserve its bullish momentum.

Wall Street's performance on Tuesday could impact the pair's price action later in the day. Moreover, the greenback's market valuation will be watched closely as the Brexit vote could cause the volatility to rise sharply in FX markets.

Technical levels to consider