Storage costs and Contango/Backwardation

In context to the formula “Futures price ~ spot price + storage costs - convenience yield” found in the level I curriculum, why do commodities with low storage costs (such as previous metals) almost exclusively in contango (as the CFA level II curriculum states)?

Shouldn’t low storage cost imply that spot and future price are relatively similar, and not in contango as the curriculum emphasized?



Simply put, because you can store them, short term price volatility has relatively lower impact on the demand side of the equation i.e. lower vulnerability to supply side shocks - assuming that to a certain extent users/consumers would be able to use the stored units of that commodity to meet their needs to withstand short term supply shocks.

Think of electricity (can’t store) vs gold markets.

PS: With respect, your wording “…spot and future prices are reletively simiar…” is non-technical to the extent that it elimnates the concept of term structure at hand here. Need to focus on how the small difference between those two prices evolve over time - which is what you’re asking