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Gold Declines to to 2-1/2 Week Lows on Stronger Greenback

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On Friday, gold prices drop to two and a half week lows, affected by a stronger greenback and as worries surrounding Donald Trump’s policy decisions started to decrease.

The greenback inched  higher compared to other major currencies on Friday, during  the fresh optimism over the viewpoint of the U.S. economy and as new policy plans by U.S. President Donald Trump gave support to the dollar.

The U.S. dollar index, which gauges the greenback’s strong point against a trade-weighted basket of six major currencies, increased 0.20% at 100.72, off the prior session’s seven-week low of 99.77.

On the Comex division of the NYMEX, delivery of gold futures for February  declined 0.64% at $1,182.85, the lowest since January 11.

The February deal ended Thursday’s session 0.67% lower at $1,189.80 an ounce.

Futures were expected to find support at $1,156.30, the low from January 4 and resistance at $1,202.80, Wednesday’s peak.

As sentiment on the dollar developed, demand for gold destabilized after Trump recommended the implementation of a 20% tax on Mexican goods to pay for a border wall.

The statements came after the U.S. President ordered on Thursday the building of a U.S.-Mexican border wall and penalty for cities protecting illegal immigrants.

“Donald Trump was also planning ‘extreme vetting’ of visa applications and a temporary ban on virtually all refugee admissions into the U.S.,” according to the reports.

Since the inauguration of Donald Trump last Friday, the dollar has been under  heavy pressure amid concerns because of the lack of clarity on his economic policies and worries that his protectionist trade position could hit corporate profits and act as a drag on development.

On Additional News

Demand for the safe-haven precious metal also stayed under pressure since the Dow topped 20,000 for the first time on Wednesday during optimism over Trump’s policies and a solid round of corporate incomes.

Market players were also looking forward  to U.S. economic progress data, along with reports on durable goods orders and consumer sentiment, scheduled later in the day.

In another place in metals trading, delivery of silver futures for March dropped 0.85% to $16.707 a troy ounce, while  delivery of copper futures for March inched down 0.11% to $2.670 a pound.

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Volkswagen Sales Refuses To Get Dampened By Scandal

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Sales of German automaker Volkswagen AG were on the rocks after the company faced an emissions-cheating scandal that pared hefty amounts to its revenues in 2016. However, solid demand in China and Eastern Europe made up for the losses in other major selling regions.

Volkswagen shares made solid gains on Monday trade following announcements of significant gains in the sales of its VW-brand car in December. This was also after a senior executive of the company expressed optimism on the resolution of the criminal investigation in the US soon.

VW brand sales increased 2.8 percent globally with 5.9 million vehicles, propped up by 14 percent growth in new car sales in the Chinese region and around 7 percent in Eastern and Central Europe.

Volkswagen shares soared 3.8% at $151.99 at 11:35 a.m. GMT.

In China, VW brand new car sales peaked 2.9 million, reestablishing the country’s top spot as Volkswagen’s largest growth source. However, sales nosedived to 9 percent in Australia and VW sales were prohibited in South Korea what with the diesel crisis it faces.

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Other primary markets saw the slump in VW brand’s new car sales.

The diesel scandal that subjected the company to be sued and probed in 2016 had hit the sales growth in the US and Canada.

Reparation of $17.5 billion was paid by the company to the US consumers and appears close to settling a criminal investigation with the Justice Department that could add up to $3 billion to the bill.

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Innovative Approach To AIDS Treatment Revealed By Glaxo

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Phase-three trial results of ViiV Healthcare’s new HIV drug in adual-drug regimen proved to be successful. The latest progress of ViiV Healthcare—a unit of GlaxoSmithKline PLC—can boost the company’s chances of hitting their bets on their ability to modify the three-drug combinations that try to treat AIDS.

The UK-based pharmaceutical giant claimed that its HIV pill dolutegravir plus Johnson & Johnson’s rilpivirine repress the virus with the same effectiveness as conventional three- or four-drug combinations when two identical yearlong trials were conducted involving around 500 patients.

ViiV Healthcare chief Dominique Limet stated that the two-drug combination is scheduled to be submitted next year to regulators. Both of these medicines are already sold as individual components in three-drug combinations or more.

If approved by the regulation, this will help in the establishment of dolutegravir as the base of simpler two-drug regimens for treating HIV.

HIV is the virus that causes AIDS. The emergence of two-drug regimens will upend the long-standing usage of at least three antiretroviral medicines to manage the virus. The three-drug combinations changed AIDS from a terminal disease to an illness that can be controlled for the long-term.

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The development could also aid Glaxo in strengthening its grip in the HIV business against arch nemesis Gilead Sciences Inc. which is currently developing a drug that would make its already-dominant three-drug regimen more powerful still.

But analysts do not have their full bets on the new drug as Gilead can still have the upper hand in the long run when it comes to drugs that seek to suppress the adverse effects of HIV.

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Amazon Just Unfolded The Future Of Retail Shopping

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The doyen of online retail, Amazon.com (AMZN) is dead set in taking over even the world of physical retail. With its introduction of Amazon Go, the brick-and-mortar retail industry is in for some shake-up.

Amazon Go is not your ordinary retail convenience store, though.

 The store format they are developing for it includes the usage of computer vision and deep-learning algorithms that will allow shoppers to just choose what they want to buy, and just grab it and go. No need to wait for long lines at the checkout counter. Also according to a report, Amazon.com has more of these kinds of innovative concepts for retail in line.

In the operation’s framework, shoppers just have to tap the Amazon Go app on their smartphones , their virtual shopping carts will automatically calculate their total expenditures, and the calculated total will be deducted from their Amazon accounts. They will be sent a receipt. The company dubbed it as the “just walk out technology” which it also boasts to be the same technology used in self-driving cars. This innovation is sure to raise the stakes with company rivals like Wal-Mart (WMT), Target (TGT), and other leading retailers.

According to the company, its first Amazon Go store with a 1,800-square-foot total area is now open in Seattle—the retail titan’s home base—but only for Amazon employees as of the moment since its still on the beta testing stage. But the company said that the store will soon be accommodating the public come early 2017.

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The store is said to feature groceries and also ready-to-eat meals every day, according to the company. The store will also stock up with “well-known brands” and “special finds”.

Amazon still has a lot of plans for its further expansion outside online retail.

Amazon shares gained 2.6 percent at 759.63 on today’s trade, but haven’t gone beyond its 50-day line yet following a slump after the victory of Trump in the presidency.

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Gold Pares 9-month Low on Dollar’s Descent

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Bullion prices rose higher on Monday trade as dollar pulls back, paring recent losses that hit 9-month lows.

Gold futures for December delivery gained 1.2 percent or $14.50 to $1,192.80 an ounce following Friday’s trade with the lead contract losing 0.9 percent to$1,179 an ounce. The previous week met losses of about 2 percent.

The greenback extended losses following a hit of its 14-year high last week.

For DailyFX senior currency strategist Ilya Spivak, Monday’s gold prices “are attempting a recovery after touching a nine-month low in Friday’s trade. The move is accompanied by a parallel decline in the U.S. dollar and U.S. front-end yields as implied in 2-year Treasury futures.”

“This hints at moderation in the Fed rate hike outlook as the catalyst behind the returning appeal of anti-fiat and non-interest-bearing assets, including the yellow metal,” he added in his blog.

Gold for immediate delivery prices hit their lowest since February at $1,171.21 on Friday. The precious metal has also fallen 7 percent so far this month, as the greenback and bond yields surge over increased market outlook over enlarged fiscal spending by US President-elect Donald Trump.

As no interest is paid in gold, the surging returns from US bonds and other markets prove to be disruptive with the metal’s movement.

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The ICE US Dollar Index which measures the greenback against six major currencies dipped 0.4 percent at 101.08 on Monday trade. The dollar’s surge can hurt dollar-denominated prices for the bullion and other commodities.

However, bullion gains are expected to be short-lived since “momentum indicators remain negatively configured and there is little to suggest that a recovery will be any more than another opportunity to sell,” noted Hantec Markets market analyst Richard Perry.

Meanwhile, December silver went with an uptick of 20 cents or 1.2 percent to $16.67 an ounce after pushing a bear market last week.

Platinum for January delivery rose by 1 percent or $8.70 to $917.310 an ounce while December palladium changed hands $12.35 or 1.7 percent to $753.40 an ounce.

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Dow Jumps Beyond 19,000

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The Dow Jones Industrial Average (DJIA) skyrocketed as it hit—for the first time in its history—beyond the 19,000 mark. The said rise was attributed to the election of the current President-elect Donald Trump and the rally in oil that caused an uptick to most stocks and indices.

As of 4:42 GMT-5, DJIA is up 67.18 points or 0.35 percent to 19,023.87. Side by side with the Dow were indices like the Standard and Poor’s 500 Index (SPX) rising 16.3 points, or 0.8 percent; Nasdaq Composite (COMP) gaining 0.9 percent or 47.4 points. Intraday best for both indices were 2,198.70 and 5,369.83 respectively. The small-cap barometer Russell 2000 Index (RUT) extended daily gains with 12.11 points or 0.92 percent—it’s longest streak since June 2003. Since December 31, 1999, this is the only time again that the Dow, SPX, COMP, and RUT finished at all-time highs on the same day.

Meanwhile in the Asia-Pacific region, since Japanese markets are closed for a public holiday, the spotlight is on the land down under’s S&P/ASX 200 as it added 2.56 percent, reaching its highest close since October with a lift from swinging prices of iron ore.

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Although the ugly start of the market makes a 19,700 on the Dow by the end of 2016 seemed somehow too good to be true, the current performance of the index might be proving otherwise. At the onset of 2016 only a few people were predicting a President Trump, but a whole slew of sectors have since benefited from a post-Trump rally. This includes stocks tied to financials and those that win with higher interest rates, industrials, infrastructure, defense, and more.

The CBOE Volatility Index (VIX) was down 0.4 point or 3.4 percent, settling at its lowest since September 28.

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Algorithmic Trades Behind Pound’s “Flash Crash”

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For two minutes, the Asian trading market was baffled as the pound went on a steep 6.1 percent crash against the dollar Friday morning. The two-minute slump was speculated to be intensified by algorithmic traders.

Algorithmic trading, or algo-trading, is the trading process where computers are programmed to execute a defined set of instructions for placing a trade. This kind of trading is used to generate returns at a beyond-human pace and frequency. Also, sometimes, they are done to eliminate emotional impact on trading activities thus making it more systematic and more liquid. Algo-trading is also known by names like automated trading or black-box trading.

Anxiety over the closely-watched U.S. jobs data also filled the trading day as the data will somehow set the Federal Reserve’s tone in its monetary policy for the rest of the year.

The decline sent sterling to its 31-year low of $1.1841, according to Bloomberg’s compiled composite prices of contributions from dealers. Worries over a ‘hard’ Brexit already sent the currency freefalling for the past weeks but Friday’s slip marked its weakest performance since 1985. Traders who chose to remain unidentified due to privacy policies said that one electronic-trading platform recorded a transaction at $1.1378.

Foreign-exchange market analyst Derek Mumford, who also advises companies on foreign-exchange and interest-rate risks, set out to find plausible reasons for the chaotic phenomena. Some speculations include the French President François Hollande being in favor of a hard Brexit, and recirculation of the ‘fat finger’ trade rumors.

“I think the pound move has possibly spooked traders but in reality, it looks like a combination of a fat finger trade, low liquidity, stops being triggered and algorithms capitalizing on the move,” said Oanda senior market analyst Craig Erlam through email.

He also added, “The fact we’ve recovered most of the losses would suggest this is the case.” But for Mumford, these reasons are just too small to justify the humongous drop.

“It was out of proportion to the supposed trigger,” said Sydney Rochford Capital Pty director.

 As of the moment, the exact explanation for what triggered the drop cannot be pinned down but Mumford and other analysts have the same opinion about the matter—that sell-offs were somehow exacerbated by black-box traders.  According to Aite Group, a consultant based in boston, these so-called algorithmic transactions have tripled their number in the foreign-exchange market over the last three years, responsible for near-$200 billion of daily turnover.

A sense of déjà vu occurs to traders as this is not the first time that a trading market experienced an ‘unexplainable’ movement. Bouts of intense volatility are becoming common phenomena not only in the global currency market but in other trading markets also as transaction volumes diminish and algorithmic traders raise market share.

The South African rand slumped more than 9 percent within 15 minutes before regaining loss in January while New Zealand’s dollar also had its flash crash last August.

“This is not something you would expect in a half-efficient market,” said Ulrich Leuchtmann, Commerzbank AG head of currency strategy in Frankfurt. “We have a liquidity situation which has eroded massively over the last few years and policy makers have largely ignored it. All the regulation that we have in place, for good reason, has the side-effect that liquidity in the FX market is much more shaky and fluctuating heavily, and we have times when it’s extremely low, especially in Asian trading.”

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Although sterling’s intraday drop of 11 percent in June after U.K.’s surprise vote to exit the European Union was bigger than Friday’s plunge, the latter was considered more strident by traders as it was much unexpected and it just happened in a very short period of time.

The move was also somehow a reminder to several dealers of the reaction to the Swiss National bank’s shocking decision to leave franc’s cap against the euro in January 2015, sending exchange rates to shoot up at more than 40 percent.

For Ralph Achkar, capital markets product director at Colt, it is still a premature conclusion to direct the cause of Friday’s rout to algorithmic traders.

“We have come across several market incidents where the initial finger was first pointed at algos, only for it to turn out to be human error or otherwise,” said Achkar.

The cause of the crash is now being looked into according to a Bank of England representative.

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Fed Holds Back, Gold Makes a Roll

After the Federal Reserve left its interest rates unchanged, gold makes for its biggest weekly advance in nearly two months.

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Spot gold dropped 0.2 per cent to $1,334.41 an ounce by 0411 GMT and traded with modest change at $1,336.72 an ounce at 11:05 a.m. in London after reaching fourth-day rally on Thursday, as reported by Bloomberg generic pricing. The metal went back on track as it climbed 2 percent this week, the highest since the period to July 29, as the greenback slid against competitors and investors opted for holdings in bullion-backed exchange-traded funds.

Silver, platinum, and palladium rallied for the week with silver posting a weekly gain of 5 percent in more than two months, although it fell at 0.6% to $19.72. Platinum edged up the market with 0.3 percent at $1,054.20 today, gaining as much as 1.7 percent in the previous session. Palladium slid 0.5 percent at $690.20, after a 1.5 percent gain on Thursday.

The last time prices rose to a record was in 2011, and gold is expected to hit a Q3 gain in what can be considered as the longest rally since the said year. As Fed holds fire in tightening policy, and Bank of Japan shifts its focus to targeting yield curves, bets on European policy makers keeping their easing stance remain. Gold is becoming an attractive store of value as central banks try to excite weak economic growth by maintaining low or negative rates and asset purchases.

“The inaction by the Fed revived investor appetite for gold,” the Australia & New Zealand Banking Group Ltd. said in a written note. “While a cut in the Fed’s outlook for rates and the weaker U.S. dollar no doubt played a part, the continued efforts by Bank of Japan to bolster economic stimulus also helped.”

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Tracked by the Bloomberg Dollar Spot Index, the currency lost 0.8 percent against major peers this week. From a June median projection of three, Fed now sees only two possible hikes for next year while hinting a year-end raise for 2016.

Increase of gold assets in ETFs has been reported every month this year except for a less than 1 percent loss in April. They have the highest expansion in more than two weeks by about 7 metric tons to almost 2,031 tons, as shown by Bloomberg’s compiled data after the Federal Reserve’s decision was announced.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, raised holdings at 0.69 percent to 950.92 tons, for a second straight session on Thursday.

US gold futures slipped 0.5 per cent to $1,338.20 an ounce.

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Weekly Outlook: Gold, Silver, Copper Futures for July 18 to 22

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On Friday, gold prices plunged, following a number of upbeat U.S. economic reports recommended that economic development recovered speed in the 2nd quarter.

Delivery of gold for August on  the Comex division of the NYMEX shed $4.80, or 0.36 percent, to settle at $1,327.40 a troy ounce by close of trade.

Prices of the yellow metal rotated a bit higher in post settlement trade following news broke of an apparent military coup in Turkey.

However, the coup attempt beaten as President Recep Tayyip Erdogan hurried back to Istanbul from a Mediterranean holiday and advised people to take to the streets in support of his government against conspirators he accused of trying to kill him.

Earlier, gold drop to the lowest levels of the session after statistics presented that U.S. retails sales upsurge over than anticipated in June, as Americans purchase motor vehicles and a variety of other goods, bolstering views that economic development picked up in the 2nd quarter.

On Friday,  anticipations were further reinforced by other statistics, presenting that industrial production noted its biggest increase in eleven months in June, driven by an increase in motor vehicle assembly. With domestic demand reinforcement, inflation is also steadily increasing.

The bullish statistics could permit the Fed to increase interest rates later this year, however, much will rest on on policymakers’ assessment of the influence on the U.S. economy of Britain’s June 23 vote to exit the EU.

Interest rate futures are now pricing in a 43 percent chance of a rate hike by December. Gold is sensitive to change in U.S. rates. A slow path to peak rates is perceived as less of a risk to gold prices than a swift series of increased.

During the week, gold futures fell $45.20, or 2.22 percent, the 1st weekly loss in seven weeks, as doubt about the effects of Britain’s Brexit vote reduced with the development of a new government.

Prices increase to over two-year peak of $1,377.50 earlier this month, as worries surrounding worldwide development in wake of Britain’s vote to exit the EU sent investors flooding into safe haven assets.

So far this year, gold is up approximately 25 percent, drawing support from fading anticipations of a Fed rate hike and as expectations increased that central banks around the globe will increase monetary stimulus to offset the negative economic surprise from the Brexit poll.

Also on the Comex, delivery of silver futures for September shed 15.7 cents, or 0.77 percent, on Friday to settle at $20.16 a troy ounce. During  the week, silver futures add on on 24.5 cents, or 0.33 percent, the seventh consecutive weekly gain.

Somewhere else in metals trading, delivery of copper for September plunged 0.9 cents, or 0.42 percent, on Friday to end at $2.233 a pound. For the week, New York-traded copper prices increased 9.1 cents, or 5.29 percent, amid optimism stimulus will be released in some of the world’s top economies.

China’s economy developed 6.7 percent in the 2nd quarter from a year-ago, unmoved from the 1st quarter, data presented on Friday. Analysts had anticipated it to slip to 6.6 percent.

Also in China,  fixed asset investment increased  9.0 percent, lower than the 9.4 percent YoY increase seen in June, whereas industrial output gained 6.2 percent, better than 5.9 percent perceived in the same period and retail sales increase 10/6%, a bit better than 10.0 percent realized.

The Asian nation is the world’s biggest copper consumer, accounting for approximately 45 percent of world consumption.

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