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Backwardation

Commodities & Futures

Backwardation is a market condition where near-term futures contracts trade at a premium to longer-dated contracts — the opposite of contango. It often signals near-term supply tightness or strong immediate demand.

Backwardation is positive for commodity ETF investors — the ETF earns a roll yield when it sells the expensive near-term contract and buys the cheaper future-dated one.

Further reading: Wikipedia

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