Abstract

This study was devised to improve our understanding of the interactive relationship among the Amex gold BUGS index, the New York gold spot and the New York goldfutures in the gold market, as well as the commodity research bureau (CRB) futures price index, the Dow Jones industrial average, the OPEC crude oil spot,and the dollar index. To do so, this study adopted the Vector Error Correction Model (VECM), the Granger causality test, the state space model and several other time series research methods. The research results indicate that co-integration exists among gold futures, gold indices and the overall economy, meaning there isa long-term equilibrium relationship with gold futures. Moreover, by utilizing thevector error correction model, the Granger causality test, and the state space model in this study found that only the AMEX gold index, the CRB futures index, theNew York gold spot and the Dow-Jones industrial average move ahead of the New York gold futures. Furthermore, the relationship between the New York gold spot and the New York gold futures as well as the CRB futures index and the New York gold futures show bi-directional causality.

Key words: Gold futures, co-integration, vector error correction model, Grangercausality test, state space model.