Gold is flirting with $1,700 an ounce as Federal Reserve Chairman Ben Bernanke won’t rule out the use of further “nontraditional policies.”

The fallout from the Jackson Hole central bank convention will likely remain the near term determinant of precious metals prices, as investors weigh up the potential for further monetary easing from the US Federal Reserve.

The expectation that Fed Chairman Bernanke would deliver a QE3 bombshell in similar fashion to previous years were dashed, but investors were heartened by the Fed’s willingness to introduce additional unconventional policy if warranted by a faltering US economy. [Gold ETFs Rise on Central Bank Hopes]

Global gold ETP holdings have continued to set fresh record highs as a result of the optimism over additional central bank stimulus, with the much awaited ECB meeting this week. Whether the ECB is closer to a new round of stimulus remains critical, especially in the wake of Spain’s decision to delay a formal bailout request last week.

Central bank gold buying led by emerging markets again in July

The latest figures released by the IMF last week showed that central banks continue to help fill the breech left by private physical demand.

Emerging market holdings of gold as a percentage of foreign reserves are very low.

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