Backwardation

Backwardation is the opposite of contango: the futures curve slopes downward, with the nearest contracts priced above those further out and above spot. For metals, which normally trade in contango, backwardation is notable and often points to tight near-term supply or unusually strong immediate demand for physical metal.

For a trader, backwardation changes the economics of holding a position. Rolling a near contract into a cheaper later contract can work in a holder's favor, the reverse of the contango case, and the shift itself can be a clue about physical-market stress.

Backwardation is a description of the curve's shape, not a directional signal. It is read together with physical premiums, inventory, and demand context rather than treated as a standalone reason to buy or sell.