The Euro was generally firmer in European trading ahead of the ECB interest rate decision, but was unable to hold above 1.45 against the US currency.
The ECB left interest rates at 4.25% following the latest council meeting. In the press conference following the decision, Chairman Trichet repeated that the growth risks were skewed to the downside. The central bank head also warned over inflation, stating that it would stay above target for a prolonged period. There was a particular focus on wage pressures and the need to avoid secondary inflationary effects.

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December gold futures closed down $2.70 at $805.50 yesterday.

Prices closed nearer the session low and were again pressured by a firmer U.S. dollar and weaker crude oil prices. Gold will continue to track the dollar very closely and in an inverse fashion. The gold bears have the near-term technical advantage. Bears' next downside price objective is closing prices below solid technical support at this week's low of $793.70.

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Stock Market: extreme weakness.

Stock Sectors breaking down: Materials, Utilities, and Energy broke down to new 7-month price lows. Technology broke down to a new 6-month price low. Industrial broke down to a new 7-week price low. Foreign stock index broke down to a new 30-month price low. NASDAQ Composite index broke down to a new 5-week price low Growth Stock/Value Stock Relative Strength Ratio fell to another new 3-month low.

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Chart Presentation: 1982 Comparison

Stock markets are leading indicators while inflation and employment data lag. Central bankers who set monetary policy- which works with a lag- off of lagging indicators should be taken out behind the wood shed for a little educatin’. We rarely have kind things to write about central bankers in general but... thank goodness that Ben Bernanke ‘gets it’. Below we show the S&P 500 Index (SPX) and the U.S. 30-year T-Bond futures from 1981 through 1982.

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