Contango

The price of an asset for forward delivery is usually above the price you would pay today...

The price of an asset for forward delivery is usually above the price you would pay today. For example, if I sell you a ton of copper now, you'll then have the hassle of storing and insuring it. If you want me to store and insure it for, say, three months before delivering it, I will charge you those 'costs of carry' on top of the 'cash price'. I will also add a bit for the fact that my money could be earning interest instead of being tied up in one ton of copper. When the price of an asset for future/forward delivery is above the cash price, the market is said to be in 'contango'. The reverse situation is unusual (perhaps a short-term supply scare is driving up the cash price) and is known as 'backwardation'.

Watch Tim Bennett's video tutorial: What are 'contango' and 'backwardation'?

Recommended

The charts that matter: the dollar extends its fall
Global Economy

The charts that matter: the dollar extends its fall

The US dollar took quite the tumble this week. Here’s how the charts that matter most to the global economy reacted.
17 Apr 2021
The charts that matter: gold up; dollar down
Global Economy

The charts that matter: gold up; dollar down

Gold rallied a little this week, while the US dollar drifted. Here’s how the charts that matter most to the global economy reacted.
10 Apr 2021
Nuclear power might never be popular – but now looks a good time to invest
Commodities

Nuclear power might never be popular – but now looks a good time to invest

Nuclear power gets a very bad press, but it is the ultimate renewable energy source. Interest in it is perking up again, says John Stepek. Which means…
9 Apr 2021
Gold will soon regain its shine
Gold

Gold will soon regain its shine

With the gold price down by 9.5% in the first quarter of 2021, it has been a rotten start to the year for gold.
9 Apr 2021

Most Popular

China owns a lot more gold than it’s letting on – and here’s why
Gold

China owns a lot more gold than it’s letting on – and here’s why

In a world awash with money-printing, a currency backed by gold would have great credibility. And China – with designs on the yuan becoming the world’…
21 Apr 2021
“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?
Bitcoin

“Joke” cryptocurrency dogecoin goes to the moon. What’s going on?

Dogecoin – a cryptocurrency created as a joke – has risen by more than 9,000% this year alone. Saloni Sardana looks at how something that began as an …
19 Apr 2021
House prices in the UK are still surging – here’s why it’ll probably continue
Property

House prices in the UK are still surging – here’s why it’ll probably continue

The latest UK house price data shows no letup in the country’s booming property market, with the biggest yearly rise since 2014. And there’s no end in…
22 Apr 2021