Why Does SHFE Silver Keep Hitting New Highs Amid Gold Volatility? How Do Institutions Interpret the Future Trend of Precious Metals? [SMM News Flash]

SMM June 18 News:

The escalation of conflicts between Israel and Iran has strengthened the market's demand for safe-haven assets. Silver, as a precious metal with both safe-haven and industrial attributes, has become an alternative choice for capital to seek refuge amid the backdrop of gold's trend being suppressed by the rebound of the US dollar index on June 17. The gold-silver ratio once broke through the historical extreme of 1:100 at the end of May, far exceeding the long-term average of 60-80, indicating that silver was severely undervalued. The demand for silver's valuation repair has supported silver prices. The long-term trend of a global silver supply-demand gap provides underlying support for silver prices. As SHFE silver technically broke through the round-number threshold of 9,000 yuan/kg in the market, it attracted more market funds to pour in, pushing silver prices to repeatedly hit new highs. As of around 15:19 on June 18, the main SHFE silver contract rose by 2.35% to 9,045 yuan/kg, and the main SHFE silver contract refreshed its all-time high since listing to 9,075 yuan/kg. Silver T+D rose by 2.12% to 9,002 yuan/kg, refreshing its all-time high since listing to 9,040 yuan/kg. COMEX silver rose by 0.51% to $37.43/oz, and COMEX silver refreshed its all-time high since September 2011 to $37.405/oz. COMEX gold fell by 0.16% to $3,401.5/oz, and the main SHFE gold contract fell by 0.21% to 785.42 yuan/g.

In the stock market: The precious metals sector saw gains. As of the close on June 6, the precious metals sector rose by 0.95%. Among individual stocks: Hunan Silver rose by 5.81%, while Shandong Gold and Western Gold rose by more than 2%.

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Market News

Federal Reserve officials held a meeting on Tuesday, and the latest economic data may increase their concerns that government policies (or at least the high uncertainty surrounding these policies) will slow economic growth in the coming months. US retail sales in May fell more than expected, dragged down by a decline in car purchases, as the surge in advance purchases by US consumers to avoid tariff-induced price increases has subsided. However, consumer spending is still supported by robust wage growth. The market generally expects the Federal Reserve to keep the target interest rate range unchanged at 4.25%-4.50%. The market will closely monitor the remarks of Fed Chairman Powell after the policy decision is announced to look for signals regarding the future path of monetary policy.

After Silver Prices Hit New Highs, Spot Market Transactions Sluggish

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On June 18, the morning reference average ex-factory price of SMM1# silver was 8,958 yuan/kg, up 163 yuan/kg or 1.85% from the previous trading day. According to SMM, the spot-futures price spread of SHFE silver-TD widened during the day. Suppliers of national standard silver ingot warrants for spot transactions with cash payment in the Shanghai area raised their premiums against TD to a quoted range of 3-5 yuan/kg. Large smelters' silver ingots were quoted with a premium of 5-8 yuan/kg against TD. Suppliers in the Shanghai area offered discounts of 22 yuan/kg against the SHFE silver 2508 contract, but trading was sluggish. Traders showed high enthusiasm for purchasing during the day. After the significant rise in silver prices, downstream industries adopted a cautious approach to procurement based on rigid demand. Overall, trading in the spot market remained sluggish.

Voices from All Sides

Regarding the future trend of precious metals, major institutions hold differing views:

At the 2025 SMM (13th) Minor Metal Industry Conference - Main Forum, hosted by Shandong Humon Smelting Co., Ltd. and SMM Information & Technology Co., Ltd., Han Xiao, General Manager of Zhishui Investment Co., Ltd., provided a future outlook for the gold and silver markets in 2025. He stated that the factors influencing precious metal prices in 2025 will primarily revolve around the US Fed's monetary policy. Considering comprehensive factors from both fundamental and technical perspectives, it is expected that the second half of 2025 will see a market that fluctuates considerably with an upward bias. There is a higher probability of fluctuations in Q3, and a possible upward trend in Q4. The upper resistance level for gold prices in the second half of 2025 is expected to be around $3,800/oz, with the lower support level at around $3,000/oz. For silver prices in the second half of 2025, the upper resistance level is expected to be around $38.0/oz, with the lower support level between $28.0/oz. The price range for silver TD in the second half of 2025 is expected to be between 7,500 yuan/kg and 9,000 yuan/kg. 》Click for details

Commerzbank forecasts that "by the end of next year, we will see silver at $40, platinum at $1,400, and palladium at $1,200 (previously $36, $1,100, and $1,050, respectively)." Commerzbank previously expected gold prices to reach $3,400/oz by the end of this year and $3,600/oz by the end of next year (previously forecasted at $3,000/oz for both time points).

In a report, Citi stated that silver prices may rise to $40 in the next 6 to 12 months. The bank added, "We expect consecutive years of deficits, sticky shareholders demanding higher prices for sales, and robust investment demand to tighten silver supply." In an optimistic scenario, silver prices may reach $46/oz by Q3 2025, driven by a faster resolution of trade tensions and a hawkish policy from the US Fed. Citi forecasts that gold prices will fall due to weak demand and an interest rate cut by the US Fed. Citi predicts that gold prices will pull back to below $3,000/oz in the coming quarters.

A recent research viewpoint from Zheshang Securities points out that silver has three attributes: financial, industrial, and speculative. When different attributes drive silver prices up, the gold-silver ratio and silver price performance diverge. Specifically, when the speculative attribute dominates, silver prices rise while the gold-silver ratio falls. When industrial demand dominates, silver prices also rise while the gold-silver ratio falls. When the financial attribute dominates, both silver prices and the gold-silver ratio rise simultaneously.

Yide Futures believes that the significant pullback in real interest rates, driven by the decline in nominal interest rates and the rise in break-even inflation rates, has strengthened support for gold. The continued pullback in the short-term interest rate differential between the US and Germany has weakened support for the US dollar. In terms of capital flows, the performance of funds allocated to gold and silver has diverged. As of June 17, SPDR held 945.94 mt (+4.01 mt) of gold, while iShares held 14,714.94 mt (-39.58 mt) of gold. The performance of speculative funds in gold and silver has also diverged. According to data released by CME on June 13, the total open interest in New York gold futures was 439,300 lots (-353 lots), while the total open interest in New York silver futures was 180,600 lots (+627 lots). The leading indicator, the North American Gold Miners Index, continued to pull back overnight. The rebound in oil prices drove inflation expectations higher, boosting silver prices. Technically, New York silver futures continued to reach new rebound highs, further opening up upside potential for gold futures. Strategically, it is recommended to continue holding gold allocations and speculative positions.

Wang Huilin, an SMM silver analyst, delivered a speech on the topic of "Evolution of Silver Supply and Demand and Price Outlook" at the 2025 SMM (6th) Silver Industry Chain Innovation Conference, which was hosted by SMM Information & Technology Co., Ltd. (SMM), co-organized by Ningbo Haoshun Precious Metals Co., Ltd. and Quanda New Materials (Ningbo) Co., Ltd., and supported by sponsors including Fujian Zijin Precious Metals Materials Co., Ltd., Huizhou Yian Precious Metals Co., Ltd., Jiangsu Jiangshan Pharmaceutical Co., Ltd., Zhengzhou Jinquan Mining and Metallurgical Equipment Co., Ltd., Hunan Shengyin New Materials Co., Ltd., Zhejiang Weida Precious Metals Powder Materials Co., Ltd., Guangxi Zhongma Zhonglianjin Cross-border E-commerce Co., Ltd., Suzhou Xinghan New Materials Technology Co., Ltd., Yongxing Zhongsheng Environmental Protection Technology Co., Ltd., IKOI S.p.A, Hunan Zhengming Environmental Protection Co., Ltd., Kunshan Hongfutai Environmental Protection Technology Co., Ltd., and Shandong Humon Smelting Co., Ltd. She stated that the increasing market risk aversion caused by the aggravating problem of population aging and the rising global economic and political uncertainties has led to a downward trend in real interest rates. The rapid growth in the PV and new energy industries, coupled with a stabilization in domestic demand and an expected increase in export demand, along with bullish factors such as the downward trend in real interest rates boosting medium and long-term capital allocation to silver assets, are likely to support silver prices to fluctuate upward in the medium and long term.

Data from the "2025 Central Bank Gold Reserves Survey" (CBGR) released by the World Gold Council on June 17 showed that more than nine out of ten (95%) of the surveyed central banks believe that global central banks will continue to increase their gold reserves over the next 12 months. This proportion represents the highest level since the survey was first conducted on this issue in 2019 and is also 17 percentage points higher than the survey results in 2024. The 2025 Central Bank Gold Reserves Survey (CBGR) collected responses from 73 central banks worldwide, marking a record high in the number of participating central banks over the years. The survey also found that nearly 43% of central banks plan to increase their gold reserves in the coming year. Despite gold prices repeatedly hitting new highs and global central banks having net purchased gold for 15 consecutive years, central banks still favour gold.

UBS expressed continued optimism about global stock markets, defense, and gold, projecting that gold prices will reach $3,500 per ounce by the end of 2025.

Goldman Sachs stated that it maintains its previous forecast, that is, the structurally strong gold-buying behavior of central banks will drive gold prices to reach $3,700 per ounce by the end of 2025 and $4,000 per ounce by mid-2026.