Crude oil recovered after plunging to as low as 76.22 after a report showing huge inventory build. Currently trading at 77.2, the benchmark contract pares losses as investors bet strong ISM non-manufacturing report will be released in the US. Moreover, the market anticipates the ECB will gradually scale back the non-standard monetary policies. Weakness in USD also spurs demand for high-yield assets.

ISM non-manufacturing probably rose to 51.5 in November from 50.6 a month ago. This would be the 3rd consecutive monthly expansion in the service sector and the highest level since December 2007. Also pay attention to the employment component which should be indicative for Friday's non-farm payrolls data.

The Beige Book showed that, during the period from late October to November 20, economic conditions in the US 'generally improved modestly'. Among the 12 districts surveyed, 8 showed expansion in activities while 4 reporting unchanged conditions. Activities in the services sectors picked up while the manufacturing sector 'mixed to moderately improving.' The weakest link was commercial real estate which was 'weak and, in many cases, deteriorating further'.

The ECB tomorrow will announce to keep its main refinancing rate at 1%. Policymakers will make several important announcements though. President Trichet should announce that the 12-month open market tender in December will be the final one. Adjustments may be made on the tender conditions. While it's not likely that the central bank will add a spread on the main refi rate, indexed rate or fixed rate may be introduced. Moreover, the ECB staff will publish new economic projections (very likely upgrades) for 2009 and 2010. The team will also release 2011 forecasts for the first time.

Gold extends gain for the 4th consecutive day. The benchmark contract rallied to a new high of 1227.5 before pulling back. The momentum is very strong and is expected to remain so as investors, both official and retail, are using the yellow metal to hedge against inflation and depreciation in USD.

Major market players have upgraded their forecasts on gold price. Richard O'Brien, CEO of Newmont Mining, the biggest U.S. gold producer, said gold price may rise to as high as 1500 within 2 years. UBS said spot gold will average 1150 in 2010 and 962.39 this year. Goldman Sachs raised its forecast for average gold prices in 2010 by +14% to 1099. Standard Chartered now expects gold to average 1150 in 2010 and 1300 in the following year.