Silver Falls Over 6% Weekly as Macro Pressure and Geopolitical Shocks Resonate [SMM Silver Weekly Review]

[Silver Price Review and Forecast]

This week, SMM 1# silver prices showed a V-shaped pattern of decline followed by rebound. At the start of the week, boosted by the unexpectedly weak US June non-farm payrolls data, silver prices edged up, hitting the weekly high of 15,220 yuan/kg on Monday, July 6. Subsequently, under the double blow of a strong US dollar and escalating geopolitical risks, they fell for three consecutive days with losses widening each day, dropping to the weekly low of 14,194 yuan/kg on Thursday, July 9, with a cumulative decline of about 6.34% for the week. The full-week trading range was 14,194-15,220 yuan/kg. The price movement pace was highly correlated with macro sentiment, and silver's elasticity was particularly notable 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 and May. Expectations for US Fed interest rate hikes cooled markedly, the US dollar index fell to a two-week low, precious metals received a short-term boost, and silver prices hit their weekly high. However, macro pressures quickly returned in the second half of the week. The US reimposed oil sanctions on Iran, and the US military launched a large-scale military strike on Iran in the early morning of July 9, sharply escalating tensions in the Middle East. Crude oil supply concerns pushed up inflation expectations. Meanwhile, the US Fed's June meeting minutes showed that a few officials believed a rate hike in June was necessary, with clear divergence among officials on the rate path, as both rate hikes and cuts were possible. The US dollar stabilized and rebounded, keeping precious metals under sustained downward pressure on a large trend, and silver prices pulled back sharply for three consecutive days.

On the spot front, spot premiums weakened gradually as silver prices pulled back this week. At the beginning of the week, after silver prices rebounded, downstream buying interest was insufficient. In Shanghai, offers were mainly at TD+5 to +20 yuan/kg, with transactions mostly at the low end. Mid-week, the high end of premiums loosened, and the premium center in Shanghai shifted down to parity to TD+15 yuan/kg, with most deals at the low end. A "rush to buy amid continuous price rise and hold back amid price downturn" mentality emerged in the market. On Thursday, July 9, some suppliers began offering at discounts. In Shanghai, morning offers fell further to between parity and TD+10 yuan/kg. Overall demand was sluggish, transactions were thin, and downstream deals were mostly negotiation-based. This week, the overall silver spot market was characterized by weakness in both supply and demand. Suppliers' willingness to sell increased, but downstream buying interest was insufficient, and spot trading remained sluggish.

Looking ahead, the focus this week will be on the direction of US CPI data and the subsequent development of geopolitical conflicts. In addition, with central banks continuing to increase gold purchases, there is still bottom support for precious metals over the medium and long term. For next week's price range, on the SGE, the low-end support is seen at 13,000 yuan/kg, with high-end resistance at 15,500 yuan/kg; on the LBMA, the low is seen at $50/oz and the high at $68/oz.

On the spot premiums front, TD quotes are expected to edge down, operating around parity; SHFE most-traded contract premiums are expected to range between a discount of 40 to 20 yuan/kg. This week, the SMM silver ingot Hong Kong spot premium against LBMA silver was at a discount of $0.5 to $0.3/oz.

[Silver Weekly Data Review]

In weekly inventory, SMM total social inventory stood at 3,366 mt, a slight buildup of 1.2% WoW. Among this, combined warrant inventory at the Shanghai Gold Exchange and SHFE increased by 30 mt WoW. The main reason for the slight inventory buildup this week was that the technical rebound in silver prices suppressed downstream consumption, and the widening of the discount on Hong Kong export premiums suppressed some export orders. In the international market, LBMA and COMEX inventories continued to build up.

As of July 8, silver ETF holdings stood at 14,899 mt, down 15.47 mt from the previous data, down 0.15% WoW, and down 0.6% MoM. The LBMA gold/silver ratio was 70, with the ratio falling then rising this week.