yes Dup ... visiblement, la demande livraison du contrat décembre Comex, c'est chaud..
ci dessous, excellente explications complémentaires de Daan Joubert.. qui explique très simplement la problématique du contango et de la backwardation... et qui rejoint les conclusions précédentes
www.lemetropolecafe.comI earlier had some questions regarding the Fekete essay, in effect saying that he is a bit too theoretical for easy understanding. I'll try to elaborate on the specific point he is making. It all has to do with the concept of backwardation (BW) and when/why it arises. You can simply read my comments and interpretation in isolation or first read the Fekete essay (Dos Passos Table) - or read it after looking through my comments.
In principle, but not in fact, the futures price of a commodity is always greater than the spot or current price. A futures price relative to the sport price is a function of two main factors: the risk-free interest rate and the duration of the futures contract. These factors combine into a measure that reflect the time value of money in terms of the cost of a transaction to have ownership of the commodity. Ownership can be either immediate - by a purchase at the spot price - or through purchase of a future and then taking delivery at some later time.
Assume that a single grain contract is equal to 100 bushels, with the grain trading at $100 a bushel; margin is $10/bushel and the contract has 1 month to go before delivery can be taken. Assume that the contract is currently also trading at $100 with delivery happening in one month's time.
Someone who needs 100 bushels of that grain 1 month from now has two options - he can buy the 100 bushels on the open market and store the grain for one month. Doing so will require an outlay of $100 to do the purchase (and some storage cost, which we will consider to be negligible.)
Alternatively, he can buy one contract at the current value of $100, with margin of $10 as the outlay. That leaves him $90 of his capital on which to draw interest, One month from now he takes delivery of the 100 bushels, which then costs him $100 ($10 margin and the $90 that has been drawing interest) and this leaves him with a profit equal to the amount of interest he has earned.
It is easy to see that with spot and the one month contract both costing $100 that everyone with any financial sense will buy the contract for $10 down as margin, and earn interest on the additional $90 that would have been needed for the purchase. In order to balance the choice between the commodity and the future, the future would be priced higher simply by demand - and the price premium in principle would be equal to the amount of interest that can be earned on $90/contract.
This reasoning can be extended to saying that the longer the duration of the contract, the higher will be the premium - basically because a longer premium allows a longer time for the difference between the margin and the actual price to draw interest. A future with 3 months to expiry enables the $90 in the above example to be invested for 3 months, earning interest. Purchase of a 6-month contract will deliver interest for 6 months, etc.
Where this sequence for higher prices, starting with spot, is broken, the condition is known as backwardation (BW) While it can occur at any point within the sequence of futures of longer duration, it most often happens between the price and the closest contract - although it can extend to additional contracts, starting with the next nearest expiration.
Fekete writes about gold that went into BW for the first time in history. Why would a commodity go into BW?
If spot is higher than the nearest future - say with one month to go before it expires - it means that people are willing to forgo the potential profit of buying the contract in favour of buying the actual commodity right now. The most obvious example occurs in the case of an industrial commodity.
Say, for example, that a factory uses a good deal of copper in its operation and cannot operate at all without it.
It has enough supply at hand for the next month, but would then have to have a new supply to continue operation.
As in the example above, the owner has two options: purchase the copper and store it or buy a futures contract for one month and take delivery when it expires.
Under normal circumstances the price of the futures contract will be higher than spot, as described above.
Now think a little before reading further - what kind of condition would have to exist for the owner to forgo the interest offered by the futures contract by buying the actual copper at the higher spot price; which by the fact that it is higher means he loses out on a good deal of interest.Keep in mind that the commodity is not needed until the end of the month.
The only logical reason is that if he buys the copper he knows he has it on site; but he believes that he might not be able to get delivery if he went for the contract - and then his factory grinds to a halt. So, giving his knowledge of the very tight conditions in the copper market he has some reason to believe that if he buys the contract, his counter party might not be able to deliver the copper one month form now.
In other words, a commodity goes into BW when users of that commodity believe supply to be so tight that they may not be able to effect delivery when they try to do so. Now for an important point: for BW to persist, all major players in the market has to share that belief. To illustrate:
Assume that copper spot is at $11/lb and the one month contract is at $10/lb - a case of backwardation. Let there be a player that sits on 1000 lbs of copper he does not himself need immediately, but will need in one month's time. If he is certain he can replace the copper after one month in the commodities exchange, he can do the following: sell the copper in the sport market for $11/lb and receive $11 000. At 10% margin he uses $1000 of that money to buy a futures contract that will deliver the same amount of copper at $10/lb. He invests the remaining $10 000 and earns interest on it for one month and then uses $9000 of the capital to pay for his 1000 lbs of copper when he takes delivery. he has the $1000 profit on the transaction as well as the interest he has earned on the $10 000.
So if BW persists, it means there is nobody out there who
a) has copper he does not need to use for some period of time and
b) believes that if he did sell the copper he can replace it by taking delivery on a futures contract.
To sum up - if BW exists and persists, we know that the above applies to all players in the market who do own that commodity and who do not intend to use it for some length of time. BW is a sign of a very tight market in that commodity and most probably prospects of it being tight for some time.
But gold is not a consumable commodity, like copper or grain or any other industrial commodity.
Only jewelers 'use up' a significant amount of gold so that they have to go into the sport market in order to keep operations going when he fears that delivery may not take place if he went the futures route. But gold used for jewelry is only a small amount of the gold that is traded - the London Bullion Market have claimed that their daily volume is many hundreds of tons; often a 1000 tons - therefore many millions of times more than the daily conversion of gold into jewelry. So why should the jewelers want to buy gold right now at a price substantially higher than that one month from now?
Gold of course has another role - it is a store of value. A hedge against uncertainty and risk.
If people who invest in gold for these reasons are willing to pay more immediately than to obtain gold by means of a delivery on the futures exchange,it means two things:
a) There are enough people so concerned about non-delivery that they will pay a large premium to get their hands on gold right now
b) There are no large holders of gold who have sufficient faith in the futures exchange to exploit the BW, as described above.
That reveals enough as to why gold has gone into backwardation, albeit perhaps only briefly.Fekete wrote about the BW on December 2 and 3. At
http://www.nymex.com/gol_fut_cso.aspx are the December 5 closing futures prices for months Dec 2008 - Aug 2009
Spot is $754.30 (per Kitco) and this is higher than the Dec, Jan, Feb and April futures, which range from $750.50 to $753.70, (No March contract)so backwardation is still in place, and out to the April contract - getting very substantial now. The June contract is $755.20.
The longer this persists - and the farther it goes out into the future - the more damning it is in terms of there being no holder of gold who is willing to take the risk of selling into the spot market and then replacing the gold through a futures contract. That says more than enough about the tightness of the market and, by implication, the risk that sellers of gold contracts will go into default when they are asked to deliver on the futures they had sold.
It is possible that the situation can reverse - that someone can obtain enough gold from somewhere to sell into the spot market WITH strong and certain belief that when the time comes to take delivery on the contracts that were purchased to replenish the gold he has sold, his contracts will be honoured. The possibility of that happening seems remote, but not impossible.
2008 has just over three weeks to go and can still become most interesting!!
If BW persists, 2009 promises to be a golden year.
Daan
Hardinvestor
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