Economic data released in the U.S. last week reinforced market expectations that the Fed might cut interest rates twice this year. Concerns over potential escalation in geopolitical conflicts have heightened risk aversion sentiment, and the soaring copper futures are spilling over into silver, causing precious metals futures to surge. As of 13:58 on May 20, SHFE gold rose 3.4%, reaching an intraday high of 582.44 yuan/gram, nearing previous highs. SHFE silver hit the limit up with an 8% increase, setting a new record high since its listing at 8,111 yuan/kilogram. COMEX gold was at $2,453.4/ounce, up 1.49%, hitting a new historical high of $2,454.2/ounce intraday. COMEX silver was at $32.425/ounce, up 3.73%, hitting a new high since 2023 at $32.75/ounce intraday.

In the silver spot market: Driven by the limit up in SHFE silver, the morning ex-factory reference price for SMM 1# silver was 8,213-8,215 yuan/kilogram, with an average price of 8,214 yuan/kilogram, up 627 yuan/kilogram from the previous day. According to SMM, with the sharp surge in domestic and international silver futures, SHFE silver hitting a new high since its listing, and COMEX silver hitting an 11-year high, the silver spot market saw very quiet inquiries and transactions, with most market participants adopting a wait-and-see attitude and there were only a few transactions.

Institutional Voices

Phil Streible, Chief Market Strategist at Blue Line Futures, analyzed that the strong rally in copper is spilling over into silver because silver is also considered an industrial commodity, widely used in solar cells and other fields.

A research report from Soochow Securities pointed out that economic data indicates a MoM decline in U.S. inflation data, providing data support for a Fed rate cut. Fed Chairman Powell stated that interest rate hikes are not currently on the Fed's agenda, significantly weakening market expectations for rate hikes due to consecutive CPI surprises since the beginning of the year. Additionally, ECB Governing Council member Knot believes June might be a good time for the first rate cut. Affected by rising overseas rate cut expectations and the failure of ceasefire talks after Israel's strike on eastern Rafah, leading to renewed geopolitical risks in the Middle East, gold prices at home and abroad are performing well, and it is expected that gold prices will continue to trend upward.

Adam Button, Chief Currency Strategist at Forexlive, stated that the recent rally in gold prices is a continuation of a broader rebound driven by the same factors. "This rebound started from the demand side, and the favorable factors are still continuing. Recent data shows that besides major Asian countries, Turkey and most Middle Eastern economies are also buying gold." Sean Lusk, Co-Director of Commercial Hedging at Walsh Trading, said that high inflation, large-scale debt issuance, and out-of-control central bank money printing are driving market participants towards precious metals and other commodities.

Everbright Futures stated that the strong sentiment in gold is gradually transmitting to the silver market. Currently, the gold-silver ratio is at a historically high level, and from the perspective of the gold-silver ratio returning to normal, silver's upward elasticity is significantly higher than gold's, which will undoubtedly push the current gold and silver trend to another climax.

Hochschild CEO Eduardo Landin stated that considering the potential industrial demand dynamics and existing supply constraints, "the market might be witnessing the beginning of a silver bull market."