SAN FRANCISCO (MarketWatch) — Gold futures dropped more than $77 an ounce Wednesday and posted a loss for February, as Federal Reserve Chairman Ben Bernanke failed to offer an indication of further quantitative easing, boosting the dollar and pressuring dollar-denominated gold.

Gold also fell as upbeat U.S. economic data dulled safe-haven demand for the metal and as investors digested news that the European Central Bank offered a larger-than-expected amount of loans to the region’s banks.

Gold for April delivery GCJ2 fell $77.10, or 4.3%, to settle at $1,711.30 an ounce on the Comex division of the New York Mercantile Exchange. Read more on gold’s selloff in The Tell.

Prices dropped as much as $83.90 to touch a low of $1,704.50. They posted their biggest one-day percentage loss since mid-December and settled at the lowest level for a most-active contract since Jan. 25.

They fell 1.7% for the month.

Wall Street's 'Leap Day' obstacle

Given the timing of gold’s decline, “I’d say month-end book squaring, plus Bernanke’s comments, look [to be] the likely cause,” said Adrian Ash, head of research at BullionVault.

In testimony prepared for the House Financial Services Committee, Bernanke said that recent improvement in employment has put the Fed on alert and that it’s watching incoming data closely.

Bernanke stopped short of saying the improvement in the jobless rate meant a better economy ahead. But it was enough of a hint of less policy accommodation to send gold futures sharply lower. Read more on Bernanke.

It is “possible that the Bernanke comments are designed to take out some of the inflation in the industrial and commodity side of the markets right now, since the Fed does not want inflation to creep up and threaten its ultra-low rate policy at this time,” said Richard Hastings, a macro strategist at Global Hunter Securities.

The market’s reaction to Bernanke’s “less than dovish” testimony “shows how much gold is linked to inflation expectations/easy money from global central banks,” said Tom Essaye, editor of the 7:00’s Report, a daily commentary on equity and commodity markets and the economy.

“I think this move is way overdone,” he said, adding that although there isn’t necessarily more quantitative easing on the horizon, “we know the Fed (and other global central banks) are going to be low for a long time.”

Adding to gold’s decline: in afternoon dealings, gold was also hit “by a large sell order on Comex, said to have been 1 million ounces (or 31 tonnes) prompted by the Bernanke testimony,” said Ross Norman, chief executive officer at London-based bullion broker Sharps Pixley.

“Given that the dollar only rallied by [about] 1%, it follows that the rationale for the selloff in gold may also be attributed to profit-taking,” he said. Gold futures have gained 9.2% year to date.

Indeed, Bernanke’s comments also helped strengthen the dollar, which in turn put pressure on dollar-denominated gold. The ICE dollar index DXY, +0.02% DXY, +0.02% rose to 78.694, up from 78.206 before Bernanke’s testimony and from 78.222 on Tuesday. Read more on currencies.

The greenback had traded a bit lower earlier, after the European Central Bank allotted a bigger-than-expected 529.5 billion euros ($713.4 billion) in loans to 800 banks, in its second long-term refinancing operation. Read more on the ECB LTRO operation.

Data pressure

Gold investors also digested the latest upbeat news on the U.S. economy.

The Chicago-area business barometer, which also is known as the Chicago PMI, accelerated to a reading of 64.0% in February from 60.2% in January, ISM-Chicago said.

“The very positive [Chicago PMI] figure seems to have paused gold’s gallop,” said Mark O’Byrne, executive director at GoldCore. “But the fundamentals of ultra loose monetary policies and currency debasement is supporting gold, which is looking better technically also,” he said.

Also of note, the Commerce Department reported revised growth of 3% for gross domestic product in the fourth quarter, faster than originally reported. Economists surveyed by MarketWatch had predicted GDP growth would be revised down to a 2.7% for the final three months of 2011 from an initial reading of 2.8%. Read more on GDP.

Gold prices jumped $13.50, or 0.8%, to settle at $1,788.40 an ounce on Tuesday. Read more on Tuesday’s gold trade.

Another factor in play for gold Wednesday may have been North Korea’s agreement to freeze development of nuclear weapons and uranium enrichment, said Phil Flynn, a vice president at PFG Best.

“There is a geopolitical risk premium in gold that has been diminished by North Korea,” he said, noting that if North Korea ever opens up, that may have a major impact on commodities — bearish for gold and bullish for oil.

Silver dive

Other metal futures finished sharply lower Wednesday, with silver sinking nearly 7% after a rally a day earlier. The reversal “is pure technical selling on expectations silver will be unable to hold its gains above $35, but we caution that silver’s move through $35 was quite strong, suggesting the rally should hold,” said Global Hunter Securities’ Hastings.

Silver for March delivery SIH2 fell $2.56, or 6.9%, to $34.58 an ounce. The May contract SIK2, which is the most active, fell $2.56, or 6.9%, to $34.64 an ounce — 4.2% higher than a month ago. Read a blog on the falling gold-to-silver ratio.

March high-grade copper futures HGH22, -0.18% fell 4 cents, or 1.1%, at $3.87 per pound. The most-active May contract HGK22, -0.09% fell 4 cents, or 1.1%, to $3.88 a pound. Prices added more than 2% in February.

Platinum for April delivery PLJ2, lost $30.90, or 1.8%, at $1,692.60 an ounce, with prices up 6.6% for the month.

March palladium PAH2 shed $13.10, or 1.8%, to $706.65 an ounce, while June palladium PAM2 settled at $708.40, down $13.80, or 1.9%, for the session, with prices up 3.2% for the month.