[Silver Price Review and Forecast]
This week, the SMM 1# silver price climbed steadily, posting a five-day winning streak on the weekly chart, with the price center continuing to move higher. Prices rose for five consecutive trading days throughout the week, repeatedly setting new interim highs.
On the macro front, bullish and bearish factors were intertwined this week, with bullish factors overall prevailing. On the bullish side, the US Treasury’s expanded long-dated bond buyback program continued to gain traction; long-end US Treasury yields pulled back in stages; the US dollar index traded in a low range with a notable decline within the month, directly enhancing the allocation value of precious metals. Global gold ETFs recorded record net inflows; central bank gold purchases remained strong, with the PBOC increasing holdings consecutively and global central banks’ net gold purchases in Q2 surging YoY. US federal debt surpassed $40 trillion, further lifting demand for sovereign credit hedging. On the bearish side, US July PCE came in slightly above expectations, inflation stickiness persisted, and September rate-hike expectations warmed slightly; the 10-year US Treasury yield consolidated at highs, and real rates continued to weigh on precious metals valuations. Wait-and-see sentiment remained strong throughout the week as the market awaited policy signals from the Jackson Hole central bank symposium.
In the spot market, trades in Shanghai were mainly at discounts of 5–10 yuan/kg. The continued rise in silver prices dampened downstream purchase willingness; traders increased quotations, but deals were concentrated at smaller discounts. Approaching month-end, some smelters increased shipments to clear inventory, releasing low-priced discounted cargo; coupled with some downstream restocking for rigid demand, transactions recovered slightly. In the latter half of mid-week, after low-priced cargo was cleared, mid-week discounts narrowed slightly. Overall, spot trades were more active than last week.
Looking ahead, in the short term, the residual impact of the US Treasury buyback policy is still unfolding. Together with the US dollar staying at low levels, ongoing support from central bank gold purchases, and a phased cooling in rate-hike expectations, expectations for precious metals to drift higher remain strong. However, the US Fed’s rate-hike cycle has not yet ended, and the US-Iran situation may still see renewed twists and turns, leaving precious metals facing downside drivers; in the short term, prices are expected to swing wildly within a broad range. Policy signals released at the Jackson Hole central bank symposium will be a key variable in the near term.
Next week’s price range: SGE futures at 16,000 yuan/kg on the downside and 17,200 yuan/kg on the upside; LBMA futures at $67/oz on the downside and $76/oz on the upside. For spot premiums, TD quotations are expected to hover around parity. This week, the SMM silver ingot Hong Kong spot premium (vs. LBMA) closed at a discount of $0.25 to $0.2/oz, with the center of export discounts moving lower WoW.
[Weekly Silver Data Commentary]
Weekly inventory: as of August 27, SMM total social inventory stood at 3,840 mt, an inventory buildup of 87 mt from the previous period. SHFE inventory built up by 42.84 mt WoW, while Gold Exchange warrants increased by 32.58 mt from the previous period. The overall pace of inventory buildup continued to ease, with no large-scale warehouse transfers. Month-end inventory-clearing demand strengthened, and a narrowing spot-futures price spread boosted traders’ sentiment to sell, improving spot trades this week. In international markets, both LBMA and COMEX inventories continued their inventory buildup trend.
As of August 26, silver ETF open interest was 15,362.73 mt, up 0.46% WoW and up 2.51% MoM. The LBMA gold/silver ratio registered 68, pulling back slightly. The rise in precious metals attracted capital inflows, but this round of macro drivers provided stronger support to gold, leaving silver’s leverage relatively weaker.
