A pricing structure in securities, foreign currencies and commodities trading wherein the prices of near future deliveries exceed those of far future deliveries. Backwardation occurs when demand for early delivery is higher than demand for later delivery. For example, If the gold price quotation for February is $1300 per ounce and that for August is $1290 per ounce, then the backwardation for six months against February is $10 per ounce:

Backwardation amount = near delivery price quotation – far delivery price quotation

Backwardation amount = 1300 – 1290 = $10