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Backwardation Bullish or Bearish

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    Kehinde A.
    Kehinde A.

    When a market is in Backwardation it means that it costs more to buy a commodity now than later. Because it is not rational to buy a commodity at an expensive rate when you have a choice to get that same commodity at a cheaper rate later, it is perceived that those that buy in such circumstances are 'desperate' and can term such as' bullish' e.g buying gold in backwardation may be caused by irrational desire to have it now at all cost. Market in backwardation can occur when there is a shortage, so buyers buy at a more expensive price now than a cheaper rate in future. It also connotes an inverted Future curve.

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