North American markets rallied Thursday after U.S. Federal Reserve Chairman Ben Bernanke said the Fed is ready to cut interest rates further to prevent the U.S. economy from sliding into recession.

In Toronto, the S&P/TSX composite closed up 62.69 points, or 0.46% to close at 13,642.63, following a volatile session.

Gold prices rose sharply after Bernanke’s comments were released. Gold for February delivery soared as high as US$897.30 an ounce on the New York Mercantile Exchange, before finishing up US$11.90 at $893.60 an ounce.

The TSX gold subgroup rose 1.65%, led by Yamana Gold Inc., which closed up 60¢, or 3.79% at $16.45.

Eight of the 10 TSX main groups advanced.

The health care group dipped 0.05%, while the energy group dropped 1.31%, as oil prices fell.

Crude for February delivery ended down US$1.96, or 2.1%, at US$93.71 a barrel on the New York Mercantile Exchange.

On the TSX Encana stock fell 1.15% to close at $68.55.

The heavyweight financials group rose 1.53%.

Royal Bank of Canada shares gained $1.07, or 2.17%, to $50.32.

A number of retail chains announced poor holiday sales showings, prompting concern over consumer spending.

Jean Coutu Group Inc. stock gained 53¢, or 5.22%, to close at $10.69 after it announced second-quarter profit dropped 88%, to $9.5 million from $79.3 million a year earlier, due to costs from its Rite Aid stake and a writedown of commercial-paper assets.

Quebecor World shares rose sharply, ultimately gaining 31¢, or 34.07%, to close at $1.22 after a newspaper reported the company was close to closing a financing deal with a major bank to solve its financing woes.

The junior S&P/TSX Venture composite index gained 4.14 points, or 0.15%, closing at 2778.66.

The Canadian dollar gained .23 of a cent to close at 99.27¢.

In New York, stocks rose following reports that Bank of America is in talks to buy beleaguered mortgage lender Countrywide Financial.

Markets took off earlier in the session after Fed chief Ben Bernanke acknowledged that the economy was slowing sharply, but held out prospects of deep cuts in interest rates.

The Fed’s next scheduled rate-setting announcement comes on January 30. Many market observers expect another half percentage point cut at that time.

The Dow Jones industrial average was up 117.78 points, or 0.92%, closing at 12,853.09. The S&P 500 was up 11.20 points, or 0.79%, to settle at 1,420.33.

The Nasdaq composite index gained 13.97 points, or 0.56%, closing at 2,488.52.