Post-holiday silver prices fell to consolidate at lows, with nonfarm payrolls shock and hawkish minutes in a tug of war [SMM Silver Weekly Review]

[Silver Price Review and Forecast]

Silver prices fell after the holiday this week, consolidating at lows. The most-traded SHFE silver contract tumbled 2.16% to close at 14,605 yuan/kg; spot 1# silver (Ag99.99%) dropped 190 yuan to 14,650 yuan/kg. COMEX silver broke below $60, hitting a low of $58.96/oz, a fresh stage low.

On the macro front, conditions were broadly bearish this week. On the bearish side, the US Fed's September meeting minutes showed most officials expect one more rate hike before year-end, with the hawkish guidance weighing on precious metals; the US dollar index broke firmly above the 102 mark to 102.24, while the 10-year Treasury yield hit 5.365% intraday, the highest since April 2002, and the 30-year yield briefly rose to 5.732%, with elevated long-end rates continuing to raise the carrying cost of precious metals; Middle East conflict continued to escalate, with Iran's Revolutionary Guard threatening to blockade the "illegal" shipping lane in the Strait of Hormuz, and high crude oil prices intensified concerns about sticky inflation, as US one-year inflation expectations rose to 3.9%, a more than three-year high. On the bullish side, US September nonfarm payrolls unexpectedly disappointed, marginally cooling rate hike expectations, and the 10-year Treasury yield pulled back from highs to around 5.28%; the PBOC increased its gold holdings by 740,000 oz in September, marking the 23rd consecutive month of increases, and global gold ETFs absorbed $31 billion in Q3, a record high, providing medium and long-term bottom support for precious metals.

In the spot market, sentiment was clearly released on the first trading day after the holiday today (Oct 8), with spot inquiry activity in Shanghai improving from pre-holiday levels. Suppliers showed strong willingness to hold prices firm, and some downstream just-in-time procurement supported trader quotes, with actual transactions leaning toward parity; offer price spreads widened slightly due to brand differences, and overall trading activity was better than the sluggish pre-holiday conditions.

Looking ahead, concerns about a resumption of the rate hike cycle and elevated long-end Treasury yields continue to cap valuations, but the disappointing nonfarm payrolls have marginally cooled rate hike expectations, and central bank gold purchases and ETF inflows continue to provide medium-term support. Silver prices are likely to consolidate at lows in the near term after the post-holiday selloff, with the trend direction still awaiting guidance from US CPI and subsequent Fed official remarks.

For next month's price range, SGE futures are seen at 14,000 yuan/kg on the low end and 15,300 yuan/kg on the high end; LBMA prices are seen at $58/oz on the low end and $62/oz on the high end. On spot premiums, market quotes for TD are expected to run around parity. This week, SMM's Hong Kong spot silver premium (against LBMA) quotation range was at a discount of $0.1 to $0.05/oz, with no new offer activity after the holiday.

[Silver Weekly Data Commentary]

As of October 7, silver ETF holdings stood at 15,311.57 mt, down 0.11% MoM. The LBMA gold/silver ratio recorded 68, with bearish signals strong recently and silver price fluctuations showing high elasticity.

On the inventory front, as of October 6, COMEX inventory was approximately 335.5 million oz, with modest destocking. As of October 8, SMM total social inventory stood at 3,934 mt, down 2 mt from the previous period. Warrant inventory was not updated during the holiday, while spot inventory saw modest destocking today.