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Gold is having a good day on Monday, rising to $1,783 (U.S.) an ounce in New York, up about $9. It is interesting that the gain came after Ben Bernanke, chairman of the U.S. Federal Reserve, spoke at the Economic Club of Indiana on Monday morning – addressing, among other topics, the threat of inflation.

Gold is seen by many investors as an ideal hedge against inflation, and Fed monetary policies in recent years – particularly the promise of ongoing ultra-low interest rates and stimulus measures such as bond-buying or quantitative easing – is often criticized as a source of big, unwanted inflation down the road.

In his prepared remarks, Mr. Bernanke addressed five questions often asked about Fed policy, including this one: What is the risk that the Fed's accommodative monetary policy will lead to inflation?

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No surprise, the Fed chairman sees little threat here, and he goes beyond the fact that current inflation is tame right now and the Fed's track record on inflation has been very good. In short, he shoots down the suggestion that the Fed is monetizing its debt.

"Monetizing the debt means using money creation as a permanent source of financing for government spending," he said. "In contrast, we are acquiring Treasury securities on the open market and only on a temporary basis, with the goal of supporting the economic recovery through lower interest rates."

What's more, he is confident that the Fed's extraordinary stimulus efforts can be undone without triggering inflation. "For example, the Fed can tighten policy, even if our balance sheet remains large, by increasing the interest rate we pay banks on reserve balances they deposit at the Fed. Because banks will not lend at rates lower than what they can earn at the Fed, such an action should serve to raise rates and tighten credit conditions more generally, preventing any tendency toward overheating in the economy."

Of course, Mr. Bernanke has said soothing things about the threat of inflation before, but that hasn't blunted attacks against him from those who maintain that inflation is in the works – and they often point to higher commodity prices as an early sign of this threat.

However, Tim Duy, a blogger and an economics professor at the University of Oregon, pointed out that commodity prices were on the rise well before the Federal Reserve began to tinker with quantitative easing or QE – the experimental policy of buying government bonds to hold down borrowing costs.

He looked at the producer price index's crude materials for further processing and noted that the spike in prices occurred in 2008, just before the worst of the financial crisis, when the Fed was essentially on the sidelines.

"If anything, commodity prices have been moving generally sideways since the Fed began expanding its balance sheet," he said on his blog.

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"And please don't say 'commodity prices have surged since the beginning of 2009.' I think it is pretty obvious that virtually everyone would not want to return to the economic conditions of 2009 to achieve lower commodity prices. The rebound of commodity prices was a natural consequence of expanding global activity; if QE is to blame, it must also be blamed for the economic rebound."

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