This issue’s syllabus · Issue No. 15 · August 9, 2026
Commodities & Alternatives.
This week’s focus is commodities, and specifically how a gold futures contract gets its price.
A futures contract is an agreement to buy something at a set price on a set date in the future. Gold trades this way constantly, and the prices quoted for later delivery are almost always higher than the price for delivery today. That gap is not a forecast. It is arithmetic.
Let’s say gold is trading at $2,000 an ounce today. You want an ounce in a year’s time, and you have two ways to get one.
You pay $2,000 today, and you own the metal for the whole year. But that $2,000 is now sitting in a vault instead of in an account paying interest. If cash pays 5%, you give up $100 over the year. Storage and insurance cost you another $20. Your ounce, a year from now, has really cost you $2,120.
Agree today to buy an ounce in a year and pay for it then. Your $2,000 stays in the account earning 5%, so it becomes $2,100. You store nothing and insure nothing.
For those two routes to be worth the same, the futures price has to be $2,120. Any lower and everyone buys the contract instead of the metal. Any higher and everyone buys metal today and sells the contract against it.
| Buy gold today | Buy the futures contract | |
|---|---|---|
| Cash out today | $2,000 | $0 |
| Interest earned over the year | $0 | $100 |
| Interest given up | $100 | $0 |
| Storage and insurance | $20 | $0 |
| True cost of one ounce in a year | $2,120 | The contract price |
The futures price is not the market’s guess about where gold is heading. It is today’s price plus the cost of carrying it, and the largest part of that cost is the interest you give up.
Which is why interest rates move the shape of the whole curve. Drop cash from 5% to 3% and the interest given up falls from $100 to $60. The futures price falls to $2,080, without anyone changing their view on gold at all. Raise rates and the gap widens again.
Friday’s real numbers land in exactly the same place. Gold for immediate delivery was $4,341.69, and the most actively traded contract, for December delivery, was $4,402.20. That is a gap of $60.51, or 1.39%, over just under five months. Annualized, that comes to about 3.5%, which sits inside the Fed’s current 3.50% to 3.75% range. The market is quoting the cost of money and calling it a gold price.
| Price | Delivery | |
|---|---|---|
| Spot gold | $4,341.69 | Immediate |
| December futures | $4,402.20 | ~5 months out |
| Gap, annualized | ~3.5% | Sits inside the Fed's 3.50%–3.75% range |
A futures price is today’s price plus the cost of holding the thing until delivery. For gold, that cost is mostly the interest you gave up, which is why a rate decision shows up in a gold quote for a month that has not happened yet.