CT Programmer

Copper Proves the Commodities Bull Isn't Over - Yet

Russ, the chart doesn't show that prices are going down over time, it shows that the further into the future the producer chooses to sell, the less the buyer of the futures will give them. Assuming prices stay flat, why would the buyer give today's price for copper in 3 years? They could just pay that price for copper now. They are paying less for waiting to receive the copper --- essentially because the copper producer is paying interest for receiving the money now, much like a loan. When you borrow, it costs you more in the end because the person loaning you the money wants to get paid to do it. That's the author's point --- that given the rate of normal interest the futures market is assuming prices will remain flat. If the futures market believed that prices were going up, you'd see something along the lines of a flat line, because the rise in price over time would compensate for the interest paid. If the futures market expected the prices to go through the roof, then you'd see a positive slope because even the interest charged wouldn't offset the rise in prices.