[Silver Price Review and Forecast]
This week, SMM 1# silver prices rose initially before falling back, with the weekly candlestick closing as a bearish candle. After rebounding above 14,500 yuan/kg early in the week, prices consolidated on a weak note, then plunged 5.34% on Thursday to close at 13,660 yuan/kg, with a cumulative weekly decline of nearly 7%.
On the macro front, this week's macro environment was broadly bearish. On the bearish side, US September CPI at 3.7% YoY and core CPI at 2.6% YoY both beat expectations, and the probability of a US Fed rate hike in October jumped rapidly from 22% to above 50%. The US dollar index hit an 18-month high, and the 10-year Treasury yield held above 4.7%, with the twin pressures of interest rates and the dollar weighing heavily on precious metals valuations. Fed officials including Hammack, Williams, and Collins made hawkish remarks in succession. Middle East geopolitical risks persisted (Houthi attacks on Saudi energy facilities and shipping disruptions in the Strait of Hormuz), lifting oil prices and exacerbating inflation stickiness. On the bullish side, the US-Russia diesel supply agreement briefly eased energy tensions, and capital inflows into the precious metals sector were notable. The PBOC increased its gold holdings for the 23rd consecutive month in September, and continued gold purchases by global central banks provided medium and long-term bottom support.
In the spot market, quotes this week generally ran at a discount of 30-55 yuan/kg against the SHFE 2612 contract, while remaining on par with to a slight premium against TD. Early in the week, silver prices rebounded, but downstream users showed strong fear of high prices and had sufficient pre-holiday stockpiles, resulting in low purchase willingness and thin trading. Mid-week, Hammack's hawkish remarks and caution ahead of the CPI release led end-users to display a "rush to buy amid continuous price rise and hold back amid price downturn" mentality, with most inclined to negotiate deals near parity. On Thursday, after the CPI beat expectations, silver prices plunged. Spot inquiries were active, but downstream wait-and-see sentiment was thick, and actual transactions fell short of expectations, with deals concentrated near TD parity. Overall trading activity pulled back compared with the pre-holiday period.
Looking ahead, with sticky US inflation, hawkish Fed guidance, and Middle East geopolitical premiums resonating together, precious metals valuations remain under pressure. Silver prices may consolidate on a weak note in the short term and test support at previous lows. A trend reversal still requires a marginal shift in rate hike expectations.
For next month's price range, SGE futures are seen at a low of 13,000 yuan/kg and a high of 15,000 yuan/kg. LBMA futures are seen at a low of $55/oz and a high of $60/oz. In terms of spot premiums, market quotes against TD are expected to run around parity to a slight discount.
This week, SMM silver ingot Hong Kong spot premiums (against LBMA) were quoted in a discount range of $0.15 to $0.1/oz. Among these, mainstream prices for processing trade exports were concentrated in a discount range of 10-15¢/oz, while very small volumes of Ordinary Trade imports were priced near parity.
[Silver Weekly Data Commentary]
As of October 14, silver ETF holdings stood at 15,371.95 mt, up 0.28% MoM. The LBMA gold/silver ratio recorded 70. Bearish signals have been strong recently, and silver price fluctuations have shown high elasticity.
On the inventory front, as of October 13, COMEX inventories stood at approximately 333.2 million oz, with a slight inventory buildup. As of October 15, SMM total social inventory was 3,909 mt. Among this, the latest warrant inventory at the gold exchange was 865.59 mt, down 12.03 mt from the previous period. The latest warrant inventory at SHFE was 1,460.96 mt, down 29.9 mt from before the holiday (September 30). Spot inventories at social warehouses also saw slight destocking.
Overall inventories showed slight destocking, mainly driven by persistently weak silver prices. Some downstream purchasing sentiment recovered, and market transactions improved in recent days, with a faster pace of post-holiday restocking. September Ordinary Trade silver ingot imports were not clearly reflected in warrant inventory growth, with some possibly flowing to end-users and some entering the Shenzhen retail market without being reflected in warrants.
