[Price Review]
Silver fell sharply at the beginning of this week, mainly due to repeated Middle East geopolitical tensions with slow progress in US-Iran negotiations, critically low global crude oil inventories driving oil prices higher, combined with rising interest rate hike expectations and rising US Treasury yields, which continued to weigh on precious metals valuations. On Wednesday evening, as US-Iran tensions eased somewhat, oil prices declined while medium- and long-term US Treasury yields both pulled back, and precious metals futures rebounded slightly. On the macro front, new Fed Chairman Waller delivered his first public speech maintaining a hawkish stance. Combined with US April non-farm payrolls and CPI both exceeding expectations, interest rate hike expectations continued to rise, with expectations for rate cuts within the year nearly zeroed out. CME Fed Watch showed a 97.3% probability of the US Fed holding rates unchanged in June and a 2.7% probability of a rate cut; a 72.7% probability of rates remaining unchanged from current levels in September, a 2% probability of a rate cut, and a 25.4% probability of a rate hike. Industrial demand side, at the beginning of the week, downstream consumption recovered slightly as silver prices declined, but demand quickly faded as prices rebounded. Some suppliers also showed weak willingness to offer due to continuously widening transaction discounts, with the price spread between high and low offers widening. The silver spot market remained generally low in activity, and inventory continued to increase slightly. Gold/silver ratio, as of May 20, the LBMA gold/silver ratio rebounded to 59x, widening notably WoW.
[Key Data]
Bearish
New Fed Chairman Waller delivered his first speech on May 15 with an extremely hawkish tone, explicitly stating there was no reason for rate cuts in the near term and not ruling out the possibility of resuming rate hikes.
April CPI came in at 3.8% YoY (the highest since May 2023), core CPI at 2.8% (the highest since September 2025), and PPI at 6.0% YoY (the largest single-month increase in over four years), with inflation stickiness exceeding market expectations.
The US dollar index rebounded above 105, the 10-year US Treasury yield broke through 4.5%, and the 30-year US Treasury yield reached above 5%, significantly raising the opportunity cost of holding precious metals.
India raised silver import tariffs from 6% to 15% while tightening import quotas, causing demand from the world's largest physical buyer to drop sharply.
Bullish:
Peru's energy crisis continued, with a national state of emergency extending through year-end. Twelve large mines have implemented staggered production, and May silver production is expected to decline by 5%-8%, with the global supply-demand gap persisting.
US-Iran negotiations saw new positive progress, with both sides engaging in indirect contact through Qatar and reaching preliminary consensus on some core disagreements.
[Upcoming Focus]
May 22: Waller's inauguration speech; Eurozone and UK May manufacturing PMI preliminary readings
May 23: US May Markit manufacturing and services PMI preliminary readings
May 27: US 2026 Q1 real GDP annualized quarterly rate revised value
May 28: US April core PCE price index, weekly initial jobless claims
Key focus: Waller's official inauguration speech as Fed Chairman, US-Iran negotiation progress
[Price Forecast]
Silver is expected to remain under pressure with adjustments next week, with core variables being Waller's inauguration speech and US-Iran negotiation progress. The market is closely watching Warsh's debut and four key focus areas: the US Fed's stance on independence, inflation framework reform, interest rate path, and balance sheet reduction pace. Combined with Warsh's previous policy positions, if he insists on prioritizing anti-inflation efforts and releases expectations of retaining the rate hike option, precious metals are expected to face sustained suppression in the short term. On the China fundamentals side, downstream buying sentiment is generally cautious. The decline in silver's absolute price has not significantly boosted downstream demand, and wait-and-see sentiment remains strong. Social inventory of spot silver ingots has increased slightly, and the market expects spot mainstream transaction discounts to widen slightly to the SGE TD discount range of 50-20 yuan/kg.
