Gold holds steady near multi-year tops, above $1870 level

• A combination of factors assisted gold to gain traction for the fifth straight session on Thursday.
• Worsening US-China relations, sustained USD selling remained supportive of the positive move.
• A positive tone around the global equity markets might cap gains amid overbought conditions.

Gold edged higher for the fifth consecutive session and shot to fresh multi-year tops, around the $1876-77 region during the early European session.

Following an early dip to the $1864 area, the precious metal managed to attract some fresh buying and was being supported by a combination of factors. Concerns about worsening US-China relations continued driving investors to traditional safe-haven asset and turned out to be one of the key factors that contributed to gold's gains.

It is worth recalling that the United States abruptly ordered China to close its consulate in Houston by Friday amid accusations of spying. China was quick to respond and vowed to respond with firm countermeasures, sparking fears over a further escalation in diplomatic tensions between the world's two largest economies.

Meanwhile, the latest leg of an uptick over the past hour or so could also be attributed to the emergence of some fresh selling around the US dollar. The second wave of coronavirus outbreak in the US has all but extinguished hopes of a quick turnaround for the domestic economy and kept the USD bulls on the defensive.

This coupled with the impasse over the next round of the US fiscal stimulus measures further undermined the greenback and provided a modest lift to the dollar-denominated commodity. Republican-majority Senate has been ignoring a $3 trillion relief bill already passed by the Democrat-majority House of Representatives two months ago.

Despite the negative developments, the optimism over a potential vaccine for the highly contagious coronavirus disease remained supportive of a positive mood around the equity markets. This, in turn, might keep a lid on any runaway rally for the non-yielding yellow metal amid extremely overbought conditions on short-term charts.

Technical levels to watch