Study On The Relationship Between Price Of China’s Gold Futures Market And Spot Market

People always respect the gold, because it has three major attributes, currency,commodity, finance. The gold futures of China was launched and traded on the ShanghaiFutures Exchange in January9,2008.The launching of gold futures is favorable toimprove China’s gold market system. The implementation of basic function of goldfutures is of great importance to the improvement of gold market. This paper made aresearch about the spot and future gold prices in China so as to examine the relationshipbetween them and check the effectiveness of price-discovery of futures market, whichhelps investors make better judgment about the price changes on the gold spot or futuresmarket.We apply some methods of econometrics, including unit root test, co-integrationanalysis, error correction model, granger causality tests, impulse response function etc.Except that, we use stochastic dominance. We collect the gold spot prices together with itsfutures at maturities of1,3and6months, and analyze their relationships to check theresults of different maturities.The research results of maturities of1and3months are the same. After furtheranalysis, we found that there is a long-term equilibrium relationship between gold spotand futures, and spot price serves a guide for futures price in a one-way approach. Theresponse of spot market is weak to the pulse of futures market, but the converse situationis much more apparent. As of the maturities of6months, the differences from theprevious two lie in that the impulse response of spot market to futures market is muchevident than the ones in the former situations. Rational investors prefer to invest on goldspot market in the previous two, and think it is identical to invest on either spot or futuresmarket in the third case. The results of paper can boost the understanding of the goldmarket situation in China and make some effective suggestions.