CPI Exceeds Expectations and Fed Turns Hawkish, Silver Prices Under Pressure, Spot Just-in-time Procurement [SMM Daily Review]

Today, SMM's 10:00 a.m. price for the SGE Ag (T+D) is 12,500 yuan/kg, with the premium/discount range quoted at TD+5 to +15 yuan/kg and a weighted average price of 8.45 yuan/kg; against SHFE 2612, it is at a discount of 20-5 yuan/kg, and against the most-traded SHFE 2702 contract, it is at a discount of 55-40 yuan/kg.

On the macro front, US October CPI rose 0.4% MoM and core CPI rose 0.3% MoM, both above market expectations and hitting the "significant rate hike threshold" previously mentioned by Waller. The US Bureau of Labor Statistics said that due to last year's government shutdown, it would not release October CPI YoY data, leaving the market to price in a "half-blind" state with only MoM and no YoY figures, naturally amplifying volatility. Four Fed officials turned hawkish on the same day: Waller supported a December rate hike and was open to 50bp; Logan (FOMC voting member) still believed at least two 25bp hikes were needed, and the pace might need to be faster than this autumn; Schmid said the current rate level was "quite accommodative" and inflation remained the top concern; Bowman said inflation still needed to be controlled, but the cost of further tightening needed to be weighed. The market raised bets on a 50bp December hike, and precious metals fell as a result.

In the spot market, the basis continued to narrow today to around 20-25 yuan/kg. After silver prices declined, downstream inquiries were relatively active, but overall procurement pace remained need-based. Shanghai traders continued to quote at premiums, with offers concentrated at a discount of 15-5 yuan/kg against SHFE 2612. Trader inventories were tight and cost pressure was high, with transactions skewed toward downstream buyers negotiating toward the lower end. Some smelters' Ex-works cargoes were offered at a discount of 20 yuan/kg against SHFE 2612.

Overall, the macro front was pressured by hotter-than-expected inflation and a chorus of hawkish Fed officials, pushing precious metals lower under pressure; on the spot side, although lower silver prices stimulated some inquiries, actual purchases remained primarily need-based, with suppliers holding prices firm and downstream buyers pushing for lower prices, resulting in relatively mild trading overall.