According to "Investor Words" a forward curve is a graph of forward interest rate values over different time periods. A forward curve is a way of evaluating the time value of money.
How are those forward curves established and how trustworthy are they? Are they based on a defined mathematical system or are they manually manipulated as well?
Lets take this Gold Forward Curve as example. It shows the expected gold price for the next years. It is obvious that such a long term prediction is absolutely speculative and probably far away from reality. Still I wonder how those forwards curves are created. Why does the curve fall off on some seemingly arbitrary points in time? Are there specific events that already have a fixed date (like an election or a bill that will be decided upon) or are those drops the result of an arithmetic operation?
All those questions lead to the main question I am having. Are forward curves useful tools for trading decisions, although it is obvious that long term prediction is impossible (or we would all be rich)? If they are indeed useful, what kind of information can I gather from such a forward curve?