backwardation

Backwardation occurs when a market thinks that the price of a commodity will be lower in coming months.

This makes it possible for backwardation to be observable.

This market situation, where , is referred to as normal backwardation.

Backwardation very seldom arises in money commodities like gold or silver.

This backwardation relationship is shown in Fig. 8.1 (assuming that the expected spot price does not change over time).

Backwardation of certain physical goods in which time and presence are drivers of price.

There may be few such parties if short-term demand exceeds supply, leading to backwardation.

The backwardation pattern is consistent with the following relationship between speculators and hedgers.

The opposite market condition to contango is known as backwardation.

Silver: In 2009 has been in backwardation since late January.

The term backwardation, when used without the qualifier "normal", can be somewhat ambiguous.

Backwardation could be a result of stockpiling supplies.

Underscoring this current "backwardation" of oil prices, the June futures rose 5 cents, to $16.19.

Backwardation occurs when the price of the nearest delivery contract costs more than more distant contracts.

If the futures price is less than the spot price, the basis is negative (a situation known as backwardation).

If spot prices of gold or silver are permanently above their futures price, the precious metals market is going into permanent backwardation.

The backwardation in crude oil prices, however, was attributed more to "spreading" by traders than to a near-term dearth of supplies.

It is argued that backwardation is abnormal, and suggests supply insufficiencies in the corresponding (physical) spot market.

Notable examples of backwardation include:

The basis will be positive (contango) if the cost of carry is positive and negative (backwardation) otherwise.

July tomatoes are effectively a different commodity from January tomatoes (contrast contango and backwardation).

It seeks to mitigate effects of contango and backwardation in commodities indexing and investing.

If there is a near-term shortage, the price comparison breaks down and contango may be reduced or perhaps even reverse altogether into a state called backwardation.

However, many commodities markets are frequently in backwardation, especially when the seasonal aspect is taken into consideration, e.g., perishable and/or soft commodities.

The backwardation contract selling today is lower than the spot price, and its trajectory will take it upward to the spot price when the contract closes.