[Silver Price Review and Forecast]
This week, SMM 1# silver prices showed a pattern of initial decline followed by recovery, with the weekly candlestick closing as a bearish candle and the price center shifting notably lower. Early in the week, silver prices pulled back sharply, hitting a stage low of 15,398 yuan/kg on Wednesday. On Thursday, prices rebounded above 16,000 yuan/kg as the US dollar weakened, but the weekly decline still approached 4%.
On the macro front, this week saw mixed signals, with bearish factors dominating overall. On the bearish side, at the Jackson Hole conference, Warsh delivered a hawkish speech, and multiple Fed officials made hawkish remarks in succession, pushing the probability of a September rate hike quickly above 60%. The US dollar index posted its largest single-day gain in two and a half months, and the 10-year Treasury yield hit 4.82% intraday, a new high since October 2023, with both rates and the dollar weighing heavily on precious metals valuations. Over the weekend, the US-Iran conflict escalated abruptly, and the surge in oil prices further fueled inflation concerns. On the bullish side, US August ADP employment rose by only 38,000, below expectations, and combined with Williams' comments that rates were appropriate and the Beige Book's dovish tone, rate hike concerns eased marginally. The sharp rise in the yen dragged the US dollar index down from highs, and Treasury yields retreated after a rapid rise, giving silver prices room to breathe. Market sentiment remained cautious throughout the week, awaiting guidance from Friday's non-farm payrolls data.
In the spot market, transactions in Shanghai were mainly at discounts of 10 yuan/kg to parity, with the most-traded SHFE 2610 contract maintaining a discount of 45 to 35 yuan/kg throughout the week. Early in the week, coinciding with month-end, suppliers showed weak willingness to sell, low-priced cargoes were hard to find, and actual transactions were sluggish. At the start of the month, wait-and-see sentiment was strong, and trading was thin. Mid-week, the sharp drop in silver prices spurred some bargain hunting, and with the spot-futures price spread narrowing, suppliers became more willing to offer and sell, with transactions recovering from the prior period. After Thursday's rebound, downstream users again showed fear of high prices, with transactions dominated by small orders for immediate needs, and trading turned sluggish again. Overall trading activity this week pulled back WoW.
Looking ahead, in the short term, the market may react ahead of the non-farm payrolls data release. If the data comes in weak, precious metals are expected to continue their rebound and recovery. However, the probability of a Fed rate hike in September remains, and geopolitical conflicts continue to escalate, so precious metals still face downward drivers. In the short term, prices are expected to maintain a pattern of wild swings.
Next week's price range: on the SGE board, support is seen at 15,500 yuan/kg and resistance at 17,500 yuan/kg; on the LBMA board, support is seen at $65/oz and resistance at $76/oz. For spot premiums, market quotes for TD are expected to run around slight discounts to parity. This week, SMM silver ingot Hong Kong spot premiums (against LBMA) closed at a discount of $0.25 to $0.15/oz, and the opening of the import window may lift quotes.
[Silver Weekly Data Commentary]
On weekly inventory, as of September 3, SMM total social inventory stood at 3,865 mt, up 26 mt from the previous period, with the pace of inventory buildup narrowing. Among this, SHFE inventory destocked by 16.92 mt WoW, as falling silver prices boosted transactions and the pace of destocking increased. SGE warrants built up by 37.65 mt from the previous period, with the overall pace of inventory buildup slowing. After the silver price rebound, end-user and downstream demand weakened somewhat, with purchases made cautiously on an as-needed basis. Trader inventory edged down, and sellers showed stronger willingness to hold prices firm. In international markets, both LBMA and COMEX inventories continued their buildup trends.
As of September 2, silver ETF holdings stood at 15,319.69 mt, down 0.3% WoW and up 0.26% MoM. The LBMA gold/silver ratio recorded 68, holding steady. This week, precious metals prices pulled back, and overall market investment enthusiasm cooled slightly, but bullish positions remained relatively concentrated, with a clear posture of building momentum for the next move.
