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HomeGlossaryContango Market

Glossary


Contango Market

A Contango Market situation is the opposite of Backwardation and it simply means that at a point in the future, people will be willing to pay more for a product than its actual price or 'spot price' is expected to be. This may be because buyers want to pay extra to own the commodity in the future rather than pay the storage costs that may be incurred by buying the product today. 

For example, an investor may agree to a futures contract where the price of one ounce of gold is £1000. If the contract has a year to run and the future spot price is £750 then the market is in contango. 

Unless the spot price changes within that period, the future price will need to fall to meet the expected future spot price.

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