Recent geo-political events and post-pandemic inflation concerns have seen large swings in commodity prices in recent years. Unsurprisingly, many of your clients are trying to understand these markets and your first task, should you choose to accept it, is to analyse the current gold and sugar markets and their forward curves. Such forward curves provide important information about market conditions for traders and investors. Prices for NYMEX Gold futures1 and NYMEX Sugar No. 11 futures2 contacts are presented in Table 1 below. We also know that on 6 September 2023 the spot price of Gold was USD1,925.63 per troy ounce and the spot price of Sugar No. 11 was USD0.2667 per pound

Recent geo-political events and post-pandemic inflation concerns have seen large swings in commodity prices in recent years. Unsurprisingly, many of your clients are trying to understand these markets and your first task, should you choose to accept it, is to analyse the current gold and sugar markets and their forward curves. Such forward curves provide important information about market conditions for traders and investors. Prices for NYMEX Gold futures 1 and NYMEX Sugar No. 11 futures 2 contacts are presented in Table 1 below. We also know that on 6 September 2023 the spot price of Gold was USD1,925.63 per troy ounce and the spot price of Sugar No. 11 was USD0.2667 per pound. Table 1: NYMEX Gold and Sugar No. 11 futures prices observed on 6 Sep 2023 (a) First, a client asks you to plot the forward curves (as of 6 September 2023) for both the NYMEX Gold futures and the NYMEX Sugar No. 11 futures contracts. You should plot these on the same set of axes with 'time-to-delivery' on the x-axis rather than the delivery date itself. So you can compare, you should also scale the futures prices by the current spot price, so that both forward curves start at 100 at time-to-delivery equals zero. For simplicity you should assume that the time-to-delivery is rounded off to the nearest month; e.g. 1 month for Oct ' 23 contracts, 2 months for Nov' 23 contracts, etc. (b) Provide an explanation of the patterns of each forward curve and discuss any differences/similarities between them. News announcements and online articles on economic market conditions that may have had an impact should be used to support your discussion