Shanghai Gold Futures Price Discovery Mechanism And Market Efficiency Research

The gold market has experienced a bear market for 20 years since 1980.From 2002, the gold market has started a new round of the bull tendency, and the enthusiasm for the gold market is also getting higher and higher in practical and academic fields. Following the establishment of China's gold spot market in October 2002, China's gold futures market was also opened on January 2008. In recent years, the enthusiasm of academic study about the price of gold runs up increasingly, mainly, however either focused on the international price of gold, or on the Shanghai gold's spot price. For the scarce research about Shanghai Gold futures price, the paper attempts to compensate for the lack in this area.This paper first analyses the formation mechanism about Shanghai Gold futures price, clarifying the impact of the price of gold futures with factors and important relationships. The study concludes that the Shanghai Gold futures prices is mainly affected by the combination of New York gold futures prices, the RMB exchange rate, Shanghai Stock Exchange Composite Index combined, especially the New York gold futures price is a major factor. But New York gold futures price which is considered as an international representative of gold futures prices, also affected by a large number of international factors. In addition to the basis factors analysis of supply and demand, the consumer price index, the dollar exchange rate, the Dow Jones index, the international crude oil prices, the federal funds rate and international Gold reserves also crucial factors to New York gold futures price. These factors influence the international gold futures prices in New York and then reflect in the price of Shanghai gold futures price.The second part of this paper validates the Shanghai gold futures price about whether it has the price discovery function, which is determined by the numerous domestic and international factors. A comparative analysis finds that New York gold futures price has the price discovery function, while the Shanghai Gold futures prices don't. The article then analyzes the results of the reasons for that, all reasons such as too large contract price of the Shanghai Gold futures, time difference with the international market trading hours, too small fluctuations, strict delivery system and other factors may affect the function of the Shanghai Gold futures market. Finally, the article suggests the relevant departments to take the following measures to enhance market functions: to establish electronic-night; to create "mini" contracts; to open foreign capital to enter the market.