[Silver Price Review and Forecast]
This week (Jun 29 - Jul 2), SMM 1# silver prices showed a V-shaped trend, falling first and then rebounding. Early in the week, silver prices edged up, supported by the unexpectedly weak US June non-farm payrolls data, hitting the weekly high of 15,220 yuan/kg on Monday (Jul 6). Under the dual impact of a strong US dollar and escalating geopolitical risks, prices then fell for three consecutive days with daily losses widening, dropping to a weekly low of 14,194 yuan/kg on Thursday (Jul 9). The cumulative drop for the week was about 6.34%, with the weekly fluctuation range at 14,194-15,220 yuan/kg. The price movement pace highly resonated with macro sentiment, and silver's elasticity was particularly significant in the pullback.
On the macro front, in the first half of the week, US June non-farm payrolls increased by only 57,000, far below the expected 113,000, with a combined downward revision of 74,000 for April-May. Expectations for US Fed interest rate hikes cooled significantly, and the US dollar index fell to a two-week low, giving precious metals a short-term boost and pushing silver to its weekly high. However, macro pressures returned quickly in the second half of the week. The US resumed sanctions on Iranian oil, and the US military launched a large-scale strike against Iran in the early hours of Jul 9, drastically escalating Middle East tensions. Supply concerns for crude oil pushed up inflation expectations. Meanwhile, the US Fed's June meeting minutes showed a few officials believed a June rate hike was necessary, with clear divergence among officials on the rate path, where both hikes and cuts were possibilities. The dollar stabilized and rebounded, with the broader trend for precious metals remaining under pressure, leading to a sharp three-day pullback in silver prices.
Spot side, spot premiums weakened gradually as silver prices pulled back this week. After the price rebound early in the week, downstream buying interest failed to keep up, with quotes in Shanghai concentrated at TD +5 to +20 yuan/kg, and deals mostly at the low end. By mid-week, the high end of premiums loosened, with the premium center in Shanghai shifting down to TD parity to +15 yuan/kg, and transactions mostly at the low end, revealing a "rush to buy amid continuous price rise and hold back amid price downturn" market mentality. On Thursday (Jul 9), some suppliers started quoting at discounts, with morning session quotes in Shanghai further dropping to TD parity to +10 yuan/kg. Overall demand was weak and transactions were sluggish, with downstream deals mainly negotiated. This week's silver spot market was characterized by weak supply and demand. Suppliers' willingness to sell increased, but downstream buying interest failed to follow up, keeping spot transactions persistently subdued.
Looking ahead, next week's focus will be on US CPI data trends and the subsequent developments of geopolitical conflicts. Given that central bank gold purchases continue to increase, the medium and long-term bottom for precious metals still holds support. For next week's price range, the SGE futures market sees a low of 13,000 yuan/kg and a high of 15,500 yuan/kg; the LBMA market sees a low of $50/oz and a high of $68/oz.
Regarding spot premiums, market quotes against TD are expected to edge down and operate around parity. Quotes against the most-traded SHFE contract are expected to operate in a discount range of 40 to 20 yuan/kg. This week, SMM's Hong Kong spot physical premium for silver ingot (against LBMA silver) was at a discount of 0.5 to 0.3 $/oz.
[Silver Weekly Data Commentary]
On weekly inventory, SMM's total social inventory stood at 3,366 mt, a slight WoW buildup of 1.2%, with combined SGE and SHFE warrant inventories rising 30 mt WoW. The main reason for the slight inventory buildup this week was a technical rebound in silver prices suppressing downstream consumption, alongside wider export discounts on the Hong Kong premium, which restrained some export orders. In the international market, both LBMA and COMEX inventories continued their buildup trend.
As of Jul 8, silver ETF holdings were 14,899 mt, down 15.47 mt from the previous data point, down 0.15% WoW, and down 0.6% compared to the previous month. The LBMA gold/silver ratio was 70, falling first and then rising this week.
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