0 a situation in which the price of a commodity (= a product such as oil or a metal that is traded in large quantities) is higher if the buyer is to receive the commodity at a future date than it is if the buyer receives it immediately:
The long time contango of the futures market is what provides metal holders (longs) with an income.
Contango has hit hard the energy futures over the past few years and markedly brought down the returns from energy markets.
Contango is a scenario where the cost of the next-month futures contract is costlier than the current month contract.
A contango is normal for a non-perishable commodity that has a cost of carry.
Except in special circumstances the gold market tends to be in positive contango, i.e. the forward price of gold is higher than the spot price.
The equilibrium futures price can be either below or above the (rationally) expected future price (backwardation or contango)...
The opposite market condition to contango is known as normal backwardation.
If contango arrangements are made on a falling market, each contango gives rise to a taxable profit arrived at by comparing the sale price with a lower purchase price.
