Does gold future interact with West Texas Intermediate (Crude Oil) by using impulse response?

Abstract

This paper selects the daily trading prices of domestic gold futures and West Texas Intermediate (WTI) crude oil futures from January 2020 to December 2020. The price discovery function of China’s gold futures market is studied by using cointegration analysis, impulse response function, and variance decomposition. By using the unit root test, it implies that the selected variable is a first-order single integration sequence, and then the cointegration test is carried out, with VAR model and Granger causality test conducted. The impulse response results show a long-term equilibrium relationship between China’s gold futures spot price and WTI crude oil futures price. China’s gold futures market has a two-way guiding role. The WTI crude oil futures price guides the domestic spot price in one direction. Domestic gold spot price is prior to WTI crude oil futures price, which impacts domestic gold futures price fluctuation. Domestic gold futures price can reflect the fluctuation of WTI crude oil futures price, but its international influence is still insufficient. It has a certain conduction function and price discovery function on the domestic gold spot market, and there is a long-term equilibrium relationship between China’s gold futures spot price and WTI crude oil futures price.