Bernanke Jackson Hole speech
Much of the speech, delivered at the Fed's annual retreat at Jackson Hole, WY, made a case for the effectiveness of the central bank's easy-money policies since 2007, including "nontraditional" actions such as QE1, QE2, and Operation Twist.
The Fed chairman said that the stimulus purchases "have provided meaningful support to the economic recovery while mitigating deflationary risks."
And in a hint to expect more of the same -- namely, QE3 -- Bernanke said that the costs of such policies, "appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant."
Bernanke also voiced concern over the sluggish economic recovery, and in particular the "painfully slow" improvement of the U.S. unemployment rate, which has changed little in 2012.
That's the sort of bad economic news that has pushed the Fed to take action in the past.
Gold fought back from its Tuesday morning low of $1,659.10 an ounce after a read on consumer confidence showed sentiment dropped in August to its lowest level in nine months. Americans have become increasingly worried about their employment scenarios and the overall outlook on the sluggish U.S. economy.
"Bad news is good news for gold again," Charles Nedoss of Kingsview Financial told CNBC.
Gold for December deliverylost $5.90, or 0.4%, to end at $1,669.70 an ounce on the Comex division of the New York Mercantile Exchange - but the slip won't last.
"Before you know it, gold is going to push for the next level, somewhere above $1,700 an ounce," Michael K. Smith, president of T & K Futures in Florida, told MarketWatch.
Gold glistened last week on news of possible additional monetary intervention from the U.S. Federal Reserve.
Following the release of the Federal Reserve's minutes last Wednesday, gold prices climbed to a 16-week high on hopes the central bank may engage in a fresh round of monetary stimulus to give life to the besieged U.S. economy.
"Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery," according to the Federal Open Market Committee (FOMC) meeting minutes from July 31 - Aug 1.
Gold futures for December delivery hit $1,655.90 an ounce Wednesday after the 2 p.m. announcement, marking a then four-month high.
Gold prices continued the rally Thursday, gaining some $32.70 as the metal relished in renewed safe-haven buying. The precious metal was buoyed by an uninspiring manufacturing report from China revealing production fell to a nine-month low in August. The data suggested more action may be needed to boost the Asian nation's lackluster economy.
Now analysts see even more upside potential as the gold-price trend slopes upward. Deutsche Bank AG (NYSE: DB) expects U.S. and Chinese policy measures to support gold's growth over the next quarter or so.
Now it's up to the federal government to do its part by fixing U.S. fiscal policy.
"Most of the economic policies that support robust economic growth in the long run are outside the province of the central bank," Bernanke said in his address to the annual conference in sponsored by the Kansas City Fed.
Some analysts thought Bernanke would hint at a third round of quantitative easing, but instead he handed off responsibility for reviving the economy to Congress and the White House.
The absence of any policy changes at first disappointed Wall Street - the Dow Jones Industrial Average fell 220 points immediately following the speech - but the negative sentiment didn't last. The Dow closed up 134.72 points, or 1.21%, while the Standard & Poor's 500 Index rose 17.53 points, or 1.51%.
"The Federal Reserve Chairman may have left the door open for more easing measures, but he has given the markets nothing concrete this morning," John Kilduff, a partner at Again Capital LLC, told Reuters. "It appears the Fed has stepped back, leaving us to await efforts from the White House and Congress, if any, to bolster theeconomy. This is a bearish development."
The only tidbit of fresh information Bernanke offered in his Jackson Hole speech was the extension of the Federal Open Market Committee's (FOMC) September meeting from one day to two (Sept. 20-21), "to allow a fuller discussion" of the "merits and costs" of the Fed's policy options.