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In the current financial crisis, promoting rapid developments of gold industry, ensuring healthy operations of national economy, and actively developing the gold futures market are very important. Functioning of the gold futures market will determine the gold market maturity and integrity. Risk transfer is one of the two basic functions of futures market. The risk transfer function is realized through hedging. China's gold futures market has been in market for more than four years, is the risk transfer function fully realized? How the performance of hedging? Based on the data of futures prices and spot prices from January 9th of 2008 to December 31st of 2010, we use the following four statistical models such as traditional regression model (OLS), two-variable vector auto regression model (B-VAR), error correction hedging model (ECM), and error correction GARCH model (EC-GARCH) to perform stationarity and cointegration test On the basis of minimum risk hedge ratio estimated, the following conclusions are made based on the study: (1) As China's gold futures market has run for more than three years, hedge is effective through the gold futures market, which can significantly reduce the participants ‘ risk of price fluctuation; (2)In practice, hedging ratio should be rationally determined by different models according to different hedging length and different expectations. Based on these conclusions, this paper also made corresponding policy recommendations.

China's gold futures market has been in market for more than four years, is the risk transfer function fully realized? How the performance of hedging? Based on the data of futures prices and spot prices from January 9th of 2008 to December 31st of 2010, we use the following four statistical models such as traditional regression model (OLS), two-variable vector auto regression model (B-VAR), error correction hedging model (ECM), and error correction GARCH model (EC-GARCH) to perform stationarity and cointegration test On the basis of minimum risk hedge ratio estimated, the following conclusions are made based on the study: (1) As China's gold futures market has run for more than three years, hedge is effective through the gold futures market, which can significantly reduce the participants ‘ risk of price fluctuation; (2)In practice, hedging ratio should be rationally determined by different models according to different hedging length and different expectations. Based on these conclusions, this paper also made corresponding policy recommendations.