Backwardation

For years there has been a debate in the long-only commodity investing world regarding the benefits of roll yield and the cost of contango. Turns out these benefits aren’t real.
Hedged commodities in storage embed a call option realized when spot prices rise over futures prices.
The cost of borrowing gold held near a 4 1/2-year high in London as U.S. futures moved into backwardation this month, a signal that near-term supplies are tightening at a time when prices gained on more physical demand.
The cost of borrowing gold held near a 4 1/2-year high in London as U.S. futures moved into backwardation this month, a signal that near-term supplies are tightening at a time when prices gained on more physical demand.
The term ‘backwardation’ has suddenly popped up in the mainstream financial media and is being touted as the signal that the price of gold is on its way back up. What does backwardation even mean?
The price of gold eased back to $1,330 per ounce Tuesday morning in London, dropping 0.7% from yesterday's five-week highs as commodities slipped with major government bond prices.
The price of silver futures contracts have been regularly flirting with a state of backwardation ever since the 2008 financial crisis, which is a sign of a growing physical silver shortage.
Commodity ETFs can experience contango when the underlying contracts roll. Here’s what that can mean for your bottom line.