Backwardation

Futures market situation in which futures prices are progressively lower in the distant delivery months. For instance, if the gold quotation for January is $360.00 per ounce and that for June is $355.00 per ounce, the backwardation for five months against January is $5.00 per ounce. (Backwardation is the opposite of contango ). See Inverted Market.

Backwardation might occur as a result of a temporary shortage of a commodity. In that case prices are expected to decline in the future.