Silver Prices V-Shaped Reversal This Week, Spot Discounts Continued to Widen [SMM Silver Weekly Review]

[Silver Price Review and Forecast]

This week, the SMM 1# silver price showed a V-shaped move of “down first, then up.” It consolidated at highs early in the week, plunged sharply mid-week to hit the weekly low, and then rebounded strongly, recouping most of the week’s losses. For the week, it rose by about 1.1% in total, with an intrawEEK amplitude as high as 5.5%.

On the macro front, this week’s macro drivers for silver centered on US Treasury yields and policy intervention. In the first half of the week, global bond markets saw a wave of selling, with long-end US Treasury yields rising to multi-year highs. Coupled with hawkish US Fed minutes and persistent tensions in the US-Iran situation, precious metals came under pressure and fell sharply. Mid-week, the US Treasury announced an expansion of long-bond buybacks, triggering a rapid plunge in US Treasury yields, while the US dollar index also tumbled. Fiscal concerns resonated with geopolitical risks, driving a strong rebound in precious metals and recouping most of the week’s losses. Overall, bulls and bears on the macro front switched sharply this week, and silver price fluctuations mainly tracked moves in US Treasury yields and the US dollar.

In the spot market, whether silver prices rose or pulled back, downstream purchase willingness failed to release effectively, with strong wait-and-see sentiment, and transactions concentrated in discount ranges. In Shanghai, premiums moved down gradually from TD-5 to +10 yuan/kg at the start of the week to TD-20 to +5 yuan/kg, with almost no response to quotes at parity and premiums, and low discounts continued to widen. With no recent purchase support from banks, suppliers faced increasing selling pressure at month-end, and transactions were all concentrated in discounts. The week showed a divergence of “prices up, discounts widening,” reflecting clearly insufficient downstream acceptance of the current high silver prices.

Looking ahead, the recent sell-off in global bond markets remained the main driver disrupting the market. Although the Treasury’s buyback operations briefly pushed yields lower, US Treasury rates overall remained at high levels, and the risk of a pullback in precious metals persisted; in the short term, prices are expected to swing wildly. In the medium and long term, as central banks continue to increase gold holdings and the rate-hike path becomes clearer, silver prices are expected to shift to consolidating on a strong note.

Next week’s price range: SGE futures, 15,000 yuan/kg on the downside and 16,800 yuan/kg on the upside; LBMA futures, $64/oz on the downside and $75/oz on the upside. For spot premiums, TD quotes are expected to hover around a slight discount. This week, the SMM silver ingot Hong Kong spot premium (against LBMA) closed at a discount of $0.2 to $0.1/oz, and export transaction prices were raised slightly.

[Weekly Silver Data Commentary]

Weekly inventory: as of August 20, SMM total social inventory stood at 3,752 mt, up 53 mt from the previous period. SHFE inventory rose 60.75 mt WoW, while SGE warrants saw a slight destocking of 9.48 mt from the previous period. Overall, the pace of social inventory buildup weakened, and there were no large-scale warehouse transfers. This week, the spot-futures price spread narrowed somewhat; suppliers showed strong selling sentiment, and banks have not recently provided purchase support in the market. In international markets, both LBMA and COMEX inventories continued their inventory buildup trend.

As of August 19, silver ETF open interest stood at 15,275 mt, down 0.14% WoW and up 1.93% MoM. The LBMA gold/silver ratio recorded 70 and drifted higher, with silver showing relatively greater elasticity in this rally.