[Silver Price Review and Forecast]
This week, the SMM 1# silver price rose first and then fell, with the weekly chart closing with a medium bearish candlestick. Early in the week, it rebounded sharply to 16,188.5 yuan/kg, then consolidated mildly above 16,100 yuan, before pulling back steeply to around 15,600 yuan/kg toward week-end, giving back all gains for the week.
On the macro front, bullish and bearish factors intertwined this week, with bullishness early and bearishness later. On the bullish side, after the September rate hike was confirmed, the market entered a digestion phase, while long-end US Treasury yields repeatedly tussled around the 5% threshold; Trump confirmed that US and Iranian officials held a three-hour meeting in New York and said it was productive, believing an agreement could be reached after the midterm elections, and peace-talk expectations once pushed precious metals to rise slowly. On the bearish side, US Fed officials turned hawkish in quick succession, with Musalem saying “further rate hikes are still needed” and Goolsbee stressing the need for clear action; the US September services PMI released on Thursday hit a nearly five-year high and the manufacturing PMI reached a more than four-year high, driving the probability of another 25-bp hike in October sharply up from 53% to 75%, while the US dollar index rose above 101; coupled with the Iranian president’s tough stance at the UN General Assembly and the US delegation’s walkout midway, geopolitical tensions flared again, sending silver prices under pressure and plunging.
In the spot market, supported by stockpiling demand ahead of the two holidays this week, downstream consumption recovered somewhat and transactions improved at one point, with offers concentrated from parity on TD to a slight premium; in Shanghai, discounts of 30-20 yuan/kg against the SHFE the most-traded contract 2610 were maintained. Early in the week, more stockpiling orders were shipped, and silver’s consolidation also gave the market some confidence, with moderate transactions; by mid-week, as stockpiling orders were gradually concluded and exited, inquiries turned slightly weaker; after silver prices plunged on Thursday, downstream inquiries held steady, but holiday sentiment was strong, with transactions concentrated around parity, and overall trading turned more sluggish than early in the week.
Looking ahead, silver currently lacks clear macro guidance. US debt expansion and recurring US-Iran conflicts have repeatedly lifted inflation and safe-haven premiums, forming a pessimistic medium-term backdrop; however, rate-hike expectations have been fully priced in and central-bank gold purchases continued to provide a floor, so the downside was also limited. In the short term, prices may swing wildly within a wide range, awaiting new variables to break the stalemate.
For next week’s price range, SGE futures were seen at 15,200 yuan/kg on the downside and 16,200 yuan/kg on the upside; LBMA futures were seen at $61/oz on the downside and $66/oz on the upside. For spot premiums, the market expected TD quotations to hover around parity, with trading likely to be sluggish over the last three days of the month. This week, the quotation range for the SMM silver ingot Hong Kong spot premium (against LBMA) was a discount of $0.1-0.05/oz, mainly based on offers to buy imported cargoes.
[Weekly Commentary on Silver Data]
As of September 23, silver ETF open interest stood at 15,350.6 mt, up 0.46% MoM. The LBMA gold/silver ratio was 66. With frequent bullish and bearish signals recently, silver prices showed high volatility elasticity.
On weekly inventory, as of September 124, SMM total social inventory stood at 3,897 mt, an inventory buildup of 14 mt from the previous period. SHFE inventory increased by 36.7 mt WoW. Although consumption was strong early in the week, the overall degree of destocking was limited. With the import window opening this month, imports were dominated by smaller silver ingots, which were registered into China warrants, resulting in inventory accumulation for two consecutive weeks. SGE warrants saw destocking of 26.8 mt from the previous period. In international markets, LBMA continued to build inventory, while COMEX inventory posted a slight buildup after one week of destocking; overall inventory remained elevated.
