Contango is the process by which near month futures are cheaper than those expiring further into the future, creating an upward sloping curve for future prices over time. It usually stems from the cost of storing commodities prior to their sale, though a futures curve can also reflect market expectations of where a commodity is heading. Though contango often comes handcuffed to negative connotations, it typically is not a problem for traders and investors who are aware of it [for more commodity news and analysis subscribe to our free newsletter].
As we kick off the New Year, commodity investors are hoping that 2014 brings more favorable returns than its predecessor. Last year was largely marked by dwindling commodity returns with a number of hard assets wreaking havoc on investors and traders across the board. Gearing up for 2014, we take a look at some of the biggest commodities currently contangoed to help you get prepared for the new year [for more commodity news and analysis subscribe to our free newsletter].
As the decade opened, precious metals (namely gold) were among the most popular commodities for long-term investors. Many had grown comfortable with the commodities as safe haven assets that would help to protect their portfolios from inflation and any unforeseen market dips. But Ben Bernanke may have let the air out of the precious metals world when he announced that the Fed would begin tapering its bond purchasing late this year or in early 2014 [for more precious metals news and analysis subscribe to our free newsletter].
Contango is a natural phenomenon in the world of commodity futures. Some view it as an evil that plagues the space, but in reality it is just another pattern that traders can profit from. Contango, simply put, is the process by which futures contracts get more expensive as the maturity dates get further out from spot. While this can hurt a long-term position, savvy traders can use this uphill curve to their advantage. Below, we outline several commodities exhibiting contango to help you make the best trading decisions for your portfolio [for more commodity news and analysis subscribe to our free newsletter].
Contango for commodity traders is as inevitable a phenomenon as taxes; eventually you will come face-to-face with an upward sloping futures curve. In many cases, this simply presents an opportunity to make a play on the respective asset or possibly to re-position current holdings. Contango is most often caused by the storage costs associated with keeping large quantities of commodities in a designated area for a period of time, but it can also reflect market expectations of how a commodity’s price will move. Below, we outline several commodities currently exhibiting contango [for more commodity news and analysis subscribe to our free newsletter].
Precious metals are rare, naturally occurring elements with a high economic value. Gold and silver derive their value from this historical use as coinage, but others like palladium have the dual benefit of being rare and useful in commercial applications. Even better, many of these applications are projected to rapidly grow, resulting in higher demand [for more palladium news and analysis subscribe to our free newsletter].
As the end of the year draws closer, tensions in Washington D.C. are starting to boil as gridlock may push us over the much-feared “fiscal cliff” and back into recession. Diminishing hopes that policymakers can strike a deal before the deadline has kept a lid on confidence while prices have remained fairly stable, which may be setting up stock markets for a disastrous open in 2013. Amid the mixed landscape, Toronto-based Sprott Asset Management rolled out a physical platinum and palladium fund on the NYSE [for more economic news and analysis subscribe to our free newsletter].
As 2012 nears its close, investors are beginning to look toward a new year, one that will hopefully be less volatile for the commodity world. The precious metals world, in particular, saw a fair amount of volatility through out the past year as this elite group of four has rarely had a quiet period. With the approaching fiscal cliff and economic uncertainty fresh in the minds of many, predicting where these commodities will end up next year has become a hobby of analysts all across the market [for more precious metals news and analysis subscribe to our free newsletter].
As is typical for the commodity world, all eyes have been fixated on gold in recent months. The precious metal has been under a microscope since the announcement of QE3 and the impending fiscal cliff. Some have called for gold to surge to new historical highs, while others are not quite so sure. But one thing is certain, gold is getting handsomely outperformed by all three of its precious metal counterparts in recent weeks, as the safe haven metal has failed to keep pace as of late [for more precious metals news and analysis subscribe to our free newsletter].
Joining the likes of Jim Rogers and George Soros, PIMCO has now thrown its hat into the hard asset ring. As the economic outlook for the U.S. has continually grown more and more bleak, we have seen a number of investors and experts hop on the commodities train as the best way to protect yourself from coming inflation. In PIMCO’s most recent economic outlook, the firm commented on the current state of the markets, the impact of QE3, and trends they see developing in the coming years, one of which was inflation [for more economic news and analysis subscribe to our free newsletter].