The Financial Impact of Fed Policy Statements and Chairman Sentiment: The Case of Gold and Silver Markets

Posted: 14 Jun 2013

See all articles by Kristjan Thorarinsson

Kristjan Thorarinsson

Independent; University of Edinburgh - Business School

Arman Eshraghi

Cardiff Business School

Date Written: June 10, 2013

Abstract

This study investigates the impact of Federal Reserve monetary policy decisions and communication on global gold and silver markets from May 1999 to June 2012. We argue that the discourse used by central bankers is not only a key driver of financial markets based on empirical evidence, but also, in essence, a device to convey authority and power. Using computer-assisted content analysis, we analyse speech styles of the current and former Federal Reserve Chairmen, Ben Bernanke and Alan Greenspan, to explore their impact on market sentiment. We find that the surprise component of Fed monetary policies significantly influences gold and silver markets. For example, a 1% surprise rate hike increases gold bullion prices by 1.3% and silver bullion prices by 1.5%. We also find significant stylistic differences between the two Fed Chairmen in their policy communications and their impact on market volatility.

Keywords: Market Sentiment, Federal Reserve, Monetary Policy, Gold and Silver, Content Analysis

Suggested Citation

Thorarinsson, Kristjan and Thorarinsson, Kristjan and Eshraghi, Arman, The Financial Impact of Fed Policy Statements and Chairman Sentiment: The Case of Gold and Silver Markets (June 10, 2013). Available at SSRN: https://ssrn.com/abstract=2278239 or http://dx.doi.org/10.2139/ssrn.2278239

Kristjan Thorarinsson

Independent ( email )

University of Edinburgh - Business School ( email )

29 Buccleuch Place
EDINBURGH, Scotland EH89JS
United Kingdom

Arman Eshraghi (Contact Author)

Cardiff Business School ( email )

Colum Drive
Cardiff, CF10 3EU
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
1,026
PlumX Metrics