Market Fluctuation: Silver Prices Surge to Record High
In early June, silver prices surged sharply amid multiple bullish factors, breaking out of the previous rangebound fluctuation pattern. On June 5, London spot silver soared 4.5% in a single day, breaching the $36/oz mark and reaching its highest level since February 2012. The cumulative weekly gain exceeded 9% (compared to just 0.6% for gold over the same period). The most-traded SHFE silver futures contract in the domestic futures market touched a record high of 8,804 yuan/kg, while relevant A-share silver concept stocks (such as Hunan Silver and Baiyin Nonferrous Group Co., Ltd.) all hit their daily limits.
The gold-silver ratio currently stands at 85-90 (i.e., 1 oz of gold ≈ 90 oz of silver), significantly higher than the 50-year average of 40-50. Some market traders believe that silver is severely undervalued relative to gold and anticipate that the gold-silver ratio will revert to the mean, increasing the likelihood of a catch-up rally in silver prices.
(1) Concentrated macro bullish factors drive silver prices to break out of the rangebound zone
Combined impact of tariffs and Eurozone interest rate cuts
On June 3, US President Trump signed an executive order raising tariffs on imported steel from 25% to 50%, heightening market concerns that key metals like silver could be next in line. On June 2, London spot silver prices broke out of the rangebound zone for the first time, reaching $34.774/oz. The domestic market was closed for the Dragon Boat Festival holiday, and after the holiday (June 3), the domestic spot silver TD price opened high at 8,500 yuan/mt.
Additionally, the European Central Bank announced on June 5 that it would cut its three key interest rates by 25 basis points, marking the eighth interest rate cut since June 2024. The current deposit facility rate has been reduced from 4% to 2%. The European Central Bank may intensify monetary easing in the second half of the year. Tariff hedging and Eurozone interest rate cuts jointly bolstered confidence among bulls in the silver market. Other bullish factors, such as the contraction of the US service sector, a slowdown in employment, and the escalation of the Russia-Ukraine conflict, while driving safe-haven demand for precious metals, failed to significantly push up silver prices. (2) Driven by Technical Momentum and Capital Enthusiasm
On the technical front, after the initial breakthrough of the key technical resistance level at $34.8/oz, program trading triggered a second round of rally amid continuous price rises, with capital enthusiasm following suit, targeting a price range of $38-40/oz. Hedge funds reduced their long positions in gold and shifted them to silver, driving a significant surge in spot silver prices. As of June 9, the open interest in silver ETFs for June increased from 13,900 mt on May 16 to 14,700 mt, marking a nearly 6% increase, indicating strong market enthusiasm for silver.
(3) Medium and Long-Term Industrial Demand Continues to Drive Destocking Trend
The expected supply-demand gap in the global silver market is set to widen in 2025. Even with a slowdown in industrial demand growth, the supply of refined silver remains constrained by mineral raw materials and recycling technologies, and the total global silver bar inventory is expected to maintain a destocking trend. Previous tariff concerns led to the transfer of a significant amount of spot silver bars to the New York market, with spot inventories in London and domestic markets both at their lowest levels in nearly three years.
Trend Outlook
Looking ahead to the market in June, market sentiment leans towards the bulls, and favourable macro front factors are expected to continue supporting the upward trajectory of silver prices, which may fluctuate upward in the short term. Against the backdrop of easing crises and the gradual realization of interest rate cut expectations, the performance of the silver market is expected to outperform that of gold, and the gold-silver ratio may also experience a pullback correction. However, following the rise in silver prices, downstream enterprises are generally adopting a wait-and-see attitude, with spot premiums pulling back from highs. Caution is warranted regarding potential impacts from an unexpectedly delayed interest rate cut by the US Fed, reduced profits and declining production in the PV end-use product sector.
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