US CPI Beats Expectations Across the Board, Rate Hike Expectations Rise, Silver Prices Plunge [SMM Daily Review]

Today, SMM’s 10:00 price for Ag (T+D) on the Gold Exchange was 14,342 yuan/kg, with the premium/discount range quoted at parity to +10 yuan/kg against TD, and a weighted average price of 2.65 yuan/kg; against the most-traded SHFE 2612 contract, it was at a discount of 45-30 yuan/kg.

On the macro front, US September CPI data came in broadly above expectations: up 3.7% YoY (vs. 3.6% expected) and up 0.3% MoM (vs. 0.2% expected); core CPI rose 2.6% YoY (vs. 2.5% expected) and 0.6% MoM, the largest gain in nearly five months. Market-implied odds of a Fed rate hike in October rose to 33%, rate path expectations tightened again, and Fed officials maintained a cautious, hawkish-leaning tone. The Fed’s Beige Book showed high oil prices are hitting all 12 districts across the US, enterprises expect prices to rise further, and concerns over sticky inflation continue to build. Markets began repricing Fed rate hike risks, the US dollar index hit an 18-month high, and precious metals gold and silver fell sharply under the double pressure of a strong dollar and tightening expectations.

In the spot market, the basis between TD and the SHFE 2612 contract traded around 35-40 yuan/kg in early trading, with silver’s single-day decline and volatility exceeding 5%. Overall spot inquiries were relatively active, but cautious “rush to buy amid continuous price rise and hold back amid price downturn” sentiment emerged among end-users downstream, with a strong wait-and-see mood, and actual transactions fell short of expectations. This morning, offers in Shanghai were concentrated at a discount of 30-40 yuan/kg against the SHFE 2612 contract, with actual deals mostly negotiated, roughly equivalent to parity against TD.

Overall, after the CPI data release, near-term concerns over sticky inflation intensified, silver came under pressure and moved lower, and further downside will depend on how market news unfolds and how rate hike expectations evolve; silver is expected to mainly consolidate on a weak note in the short term. In the spot market, downstream wait-and-see sentiment remains thick, and actual transactions are skewed toward parity.