After opening stronger, the gold price gave up its gains and turned lower in tandem with weaker equity markets and a stronger U.S. dollar. Closing at $963.74 per ounce, down $1.57, the gold price is now higher by a little less than 1% for the week. If the gains hold it would be the fourth straight week the gold price has closed higher. The U.S. Dollar Index (DXY) rose 0.46 to 77.98, reversing what has been a strong downward path. Including this week, the DXY has been lower for five weeks in a row. Notably, the commodity currencies turned lower, led by the Canadian dollar, which had been moving relentlessly higher coming into today's trading session. The U.S. dollar's rally was sparked by comments made overseas by European Central Bank (ECB) President Jean-Claude Trichet.

At a press conference in Frankfurt, Trichet indicated that further stimulus out of the ECB was unlikely. In response to questions about the path the ECB would take following this morning's announcement that the Bank of England (BOE) would be increasing the size of its quantitative easing program, Trichet referenced the better mood of the marketplace in signaling his preference for no further policy response. This sparked profit-taking and a sell-off ensued.

Global stimulus has provided a jolt to economies across the globe. Whether the world's economies are strong enough to stand on their own without the present multitude of government programs and policies is up for debate. There is skepticism that the private sector is strong enough to stand alone, and if governments are seen as standing back, then a further sell-off is likely.

Next week's Federal Open Market Committee (FOMC) meeting will provide some insight as to whether Chairman Bernanke and the FOMC lean more towards the ECB, or side with the more aggressive BOE. If it does come to pass that central bankers will attempt to let their economies stand on their own legs, then the reflation trades that have benefited so greatly in recent weeks and months will be at risk. Over the short-term, that would have negative implications for the gold price.

If policymakers stay their course aggressively fighting deflation, then the gold price should continue its upward trajectory without interruption. One investor apparently taking this view put on an aggressively gold-bullish trade late in the day by getting very long the gold mining equity sector. An investor purchased 22,000 Market Vectors Gold Miners ETF (GDX) December 45 calls for 2.85. This trade allows the purchaser to control 2.2 million shares of the GDX above a price of $45, which equates to a $99 million dollar long position in the gold mining equity ETF.