Why Does SHFE Silver Continue to Hit New Highs Amid Gold Volatility? How Do Institutions View the Future Trend of Precious Metals? [SMM Flash News]

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 price 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 its price. The long-term trend of a global supply-demand gap in silver provides underlying support for its price. As SHFE silver broke through the psychological resistance level of 9,000 yuan/kg in technical terms, it attracted more market capital inflows, pushing silver prices to 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. 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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Recently, the gold-silver ratio has significantly pulled back, dropping from a historical high of over 100 at the end of May to 91 on June 17. This change stems from a surge in silver's industrial demand, an influx of safe-haven and speculative capital, causing silver's gains to far outpace those of gold in the near term. Gold, meanwhile, has been oscillating around $3,400/oz recently, leading to a repair in the price spread between gold and silver.

US Fed officials held a meeting on Tuesday, and the latest economic data may heighten their concerns that US government policies (or at least the high degree of uncertainty surrounding these policies) will slow US economic growth in the coming months. US retail sales in May fell more than expected, dragged down by a decline in car purchases and the fading of a buying spree by US consumers to avoid tariff-induced price increases. However, current consumer spending is still supported by robust wage growth. The market generally expects the US Fed to keep the target interest rate range unchanged at 4.25%-4.50%. The market will closely monitor the speech by Fed Chairman Powell following the policy decision announcement, seeking signals for the future path of monetary policy. Currently, the market generally expects the US Fed to remain on hold this time, but expectations for monetary easing in H2 have risen, with silver showing strong performance amid heightened easing expectations.

"Fed Whisperer" Nick Timiraos: There are compelling reasons to believe that if not for the risks posed by tariffs to prices, the Fed would have been prepared to cut interest rates this week, given recent improvements in inflation. Timiraos believes that the past five years have altered perceptions of inflation and what might occur.

Sluggish trading in the spot market after silver prices hit new highs

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On June 18, the morning reference average ex-factory price of SMM 1# silver was 8,958 yuan/kg, up 163 yuan/kg from the previous trading day, representing a 1.85% increase. According to SMM, the spot-futures price spread of SHFE silver-TD widened during the day. Suppliers holding warrants for national standard silver ingots in spot cash transactions in Shanghai raised their premiums against TD to 3-5 yuan/kg, while large-scale smelters' silver ingots were quoted at a 5-8 yuan/kg premium against TD. Suppliers in Shanghai offered discounts of 22 yuan/kg against the SHFE silver 2508 contract, but trading was thin. Traders showed high enthusiasm for purchases during the day, while downstream end-users exercised caution in procurement amid the sharp rise in silver prices, resulting in an overall sluggish trading environment in the spot market.

Voices from the Market

Opinions vary among major institutions regarding the future direction of precious metals:

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 an outlook for the gold and silver markets in 2025, stating that factors influencing precious metal prices in 2025 will primarily revolve around the US Fed's monetary policy. Considering a combination of fundamental and technical factors, it is expected that the second half of 2025 will see a fluctuating but generally upward trend, with a higher probability of fluctuations in Q3 and a possible upward bias in Q4. The upper resistance level for gold prices in H2 2025 is expected to be around $3,800/oz, with a lower support level near $3,000/oz. For silver prices in H2 2025, the upper resistance level is expected to be around $38.0/oz, with a lower support level between $28.0/oz. The price range for silver TD in H2 2025 is expected to be between 7,500 yuan/kg and 9,000 yuan/kg. 》Click to view 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 (up from $36, $1,100, and $1,050, respectively)."Commerzbank previously forecast that gold prices would reach $3,400 per ounce by the end of this year and $3,600 per ounce by the end of next year (previously forecasting $3,000 per ounce for both time points).

In a report, Citi stated that silver prices could rise to $40 within the next 6 to 12 months. The bank added, "We expect that consecutive years of deficits, sticky shareholders demanding higher prices, and robust investment demand will tighten silver supply." In an optimistic scenario, silver prices could reach $46 per ounce by Q3 2025, boosted 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 interest rate cuts by the US Fed. Citi said gold prices will pull back below $3,000 per ounce in the coming quarters.

A recent research view 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 and the gold-silver ratio falls; when industrial demand dominates, silver prices rise and the gold-silver ratio also falls; when the financial attribute dominates, both silver prices and the gold-silver ratio rise simultaneously.

Galaxy Futures believes that, in terms of geopolitics, after the initial tension, the current market's risk-averse sentiment has slightly cooled, and wait-and-see attitudes are emerging, temporarily halting gold's rally. In the US, on the one hand, the latest retail data released yesterday was unexpectedly weak, showing the largest decline since March 2023, possibly due to tariff concerns gradually being reflected in macroeconomic data. On the other hand, the latest remarks from the "Fed Whisperer" have injected a strong dose of confidence into market bets on the US Fed cutting interest rates in H2. Optimistic expectations for liquidity easing are supporting gold's high volatility while strongly pushing silver to new highs since 2012. In the short term, focus on the US Fed's interest rate decision meeting early Thursday morning to find clues about the future path of monetary policy. It is expected that precious metals, as a whole, are likely to continue holding up well.

Yide Futures analyzes: The nominal interest rate pullback, coupled with a rise in the break-even inflation rate, has significantly reduced the real interest rate, strengthening support for gold. The continued pullback in the short-end US-German interest rate differential has weakened support for the US dollar. In terms of capital flows, the performance of gold and silver allocation funds has diverged. As of June 17, SPDR held 945.94 mt (+4.01 mt), and iShares held 14,714.94 mt (-39.58 mt). The performance of gold and silver speculative funds has also diverged. CME data released on June 13 showed that the total open interest in NYMEX gold was 439,300 lots (-353 lots), and the total open interest in NYMEX silver was 180,600 lots (+627 lots). Overnight, the leading indicator, the North American Gold Miners Index, continued to pull back, while the rebound in oil prices drove inflation expectations higher, boosting silver prices. Technically, silver futures on the NYMEX reached new rebound highs, further opening up upside potential for gold futures. Strategically, positions in gold allocations and speculative holdings should continue to be held.

At the 2025 SMM (6th) Silver Industry Chain Innovation Conference 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 strongly 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., SMM silver analyst Wang Huilin discussed the topic of "Evolution of Silver Supply and Demand and Price Outlook," stating that the increasing market risk aversion caused by the aggravating issue of population aging and rising global economic and political uncertainties has led to a downward trend in real interest rates; the PV and new energy industries have experienced rapid growth, with domestic demand stabilizing and export demand expected to increase; the downward trend in real interest rates has boosted medium and long-term capital allocation to silver assets, among other bullish factors, which may support silver prices to fluctuate upward in the medium and long term.

Data from the World Gold Council's "2025 Central Bank Gold Reserves Survey" (CBGR), released on June 17, showed that over nine in 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 marks the highest since the survey was first conducted in 2019 and represents a 17 percentage point increase from the 2024 survey results. The "2025 Central Bank Gold Reserves Survey" (CBGR) collected responses from 73 central banks worldwide, setting a new record for the number of participating central banks in previous 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 remain highly favourable towards gold.

UBS stated that it remains bullish on global equities, 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 strong structural gold purchases by 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.