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Three words from Ben Bernanke sink the markets: ‘Later this year’ Add to ...

The Bank of Canada’s benchmark overnight rate now stands at 1 per cent, and isn’t expected to move until the second half of next year at the earliest, while the U.S. central bank’s Fed funds rate is near zero.

The Fed has pledged to keep it there until unemployment eases to 6.5 per cent.

How Greenspan moved gold, silver
Consider this another way to look at “irrational exuberance,” that famous emotion cited by Alan Greenspan at the height of the dot-com bubble.

The tone set in speeches by the former Federal Reserve chairman had the power to move gold and silver prices, new academic research suggests. The current Fed chief, Mr. Bernanke, has no such power, according to the findings published by the University of Edinburgh.

The researchers used text analysis software, Diction 6.0, to analyze some 400 speeches and comments between mid-1999 and mid-2012, looking at “certainty, optimism and realism” in the comments of the world’s most powerful central bankers.

Mr. Greenspan affected silver markets with his certainty, activity and realism, and gold prices with his certainty, says the recent study by Kristjan Thorarinsson and Arman Eshraghi.

“There is therefore evidence that the tone of voice in the communication from Alan Greenspan can move the gold and silver markets,” the authors said.

“Bernanke, however, does not move markets with the tone of his voice.”

Their study looked at the impact on gold and silver prices from surprise monetary policy decisions, and the tone of voice of the past and current Fed chiefs.

 “The study is valuable to market participants as it gives insight into how financial markets behave and what role gold and silver have in the world of finance,” the authors said.

“Commodity exchanges, central banks and governments that look to attain orderly and efficient markets should have an interest in information that explains how the precious metals respond to monetary policy and central bank communication,” they added.

“For investors, this can help them devise trading strategies and better diversify their portfolios.”

The researchers found that a 1-per-cent increase in the certainty of Mr. Greenspan’s tone could boost silver prices by 0.03 per cent, and the prices of gold company shares by 0.1 per cent.

“When the communication between chairmen is compared the results show that Greenspan has significantly more activity and realism whereas Bernanke has more optimism in his tone,” they added.

Given the study, which was also reported in The Financial Times, it will be worth watching closely this afternoon when Mr. Bernanke meets reporters after the Federal Reserve’s policy decision.

Investors are on edge, worried that the Fed will begin to pull back on its quantitative easing program too early. No change is expected today in the $85-billion-a-month asset-buying stimulus, but markets are watching for signals.

Wind investors pull bid
Wind Mobile’s foreign investors are dropping their bid to formalize control over the small Canadian carrier, The Globe and Mail's Rita Trichur reports.

The move by Vimpelcom Ltd.’s Cairo-based subsidiary throws into question the future of Wind at a time when Ottawa is working to salvage its goal of ensuring at least four carriers in every regional market.

Orascom gave no official reason for its decision. Last week, The Globe and Mail reported its bid for control was being delayed over concerns about national security

Imperial to close refinery
Imperial Oil Ltd. will shut its 95-year-old Dartmouth, Nova Scotia, oil refinery after a 13-month search for a buyer came up dry, The Globe and Mail's Jeff Jones reports.

That was due to the brutal impacts of far too much production capacity on both sides of the Atlantic and the need to import expensive crude into the region to manufacture gasoline and other fuels.

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