Silver prices recover from oversold conditions after PPI release; spot trading turns active [SMM Daily Review]

Today, SMM’s 10:00 a.m. price for the Shanghai Gold Exchange Ag (T+D) was 13,858 yuan/kg, with the premium/discount range quoted at parity to +10 yuan/kg against TD, and the weighted average price at 2.83 yuan/kg; against the most-traded SHFE 2612 contract, it was at a discount of 40-30 yuan/kg.

On the macro front, US September PPI data beat expectations: up 1.3% MoM, versus the 0.5% expected, with the prior reading revised from 0.4% to 0.5%, marking the largest MoM gain since March 2022; up 6.3% YoY, versus the 5.3% expected, with the prior reading revised from 5.4% to 5.6%, the highest YoY gain since December 2022. However, the previous day’s hotter-than-expected CPI had already fully boosted Fed rate hike bets, and after the PPI release, the market traded “sell the expectation, buy the fact.” Meanwhile, Fed officials Daly and Bowman collectively sent dovish signals, saying there was no need to rush rate hikes, and the probability of an October hike pulled back. The US dollar and Treasury yields weakened: the 10-year Treasury yield fell more than 10 basis points to a three-week low, and the US dollar index pulled back. Today, precious metals futures broadly recovered from oversold levels.

In the spot market, the basis between TD and the SHFE 2612 contract in early trading was basically flat from yesterday, hovering around 35 yuan/kg. With silver prices stabilizing, market purchasing sentiment was moderate, and some downstream buyers ended their wait-and-see stance to enter the market for moderate purchases. Overall, inquiries in the spot market were relatively active, and traders reported good transactions near parity. This morning, offers in Shanghai were concentrated at a discount of 30-40 yuan/kg against the SHFE 2612 contract, while actual transactions tended toward parity against TD.

Overall, after today’s oversold recovery in precious metals, cautious market sentiment eased somewhat, spot market trading was relatively active, and actual transactions leaned toward parity.