Rising expectations for US Fed interest rate cuts and declining inventory boost silver prices: Why did silver supply decrease again in November?

Market Review
In November, fluctuations in expectations for US Fed interest rate cuts became the most significant macro driver for the silver market. Boosted by multiple positive factors, silver prices rose for five consecutive trading days, hitting a fresh all-time high on November 28. As of 13:56 that day, COMEX silver was up 1.95% at $54.65/oz, while the SHFE silver main contract gained 2.94% to 12,694 yuan/kg, peaking at 12,750 yuan/kg during the session, reflecting strong bullish momentum.

Long-term, the market widely expects the US to cut interest rates by 25 basis points in December, followed by roughly three more cuts next year. Against this backdrop, with growing expectations for rate cuts and supply growth unable to meet rising industrial and investment demand, the supply-demand imbalance in the silver market is unlikely to ease in the short term, and prices are expected to continue fluctuating upward.

Spot market inventory continues to fall, exacerbating supply-demand imbalance
Recently, domestic spot silver inventory has repeatedly hit record lows, with spot premiums unusually holding near 30 yuan/kg, becoming a key fundamental factor supporting silver price gains.

The decline in domestic spot supply stems from multiple factors. Raw material supply constraints have limited smelter production growth, while several smelters have seen concentrated silver quota exports for multiple consecutive weeks. Specifically, domestic silver production in November fell about 3.63% from October. A lead system at a smelter in Jiangxi began a one-month routine maintenance in late November, reducing silver output for the month. Additionally, copper smelters in Henan, Gansu, and Fujian reported slight production dips due to annual target fulfillment or sufficient raw material supply. A smelter in Yunnan also cut output for routine maintenance but is expected to resume normal operations in December. Although lead and copper smelters in Inner Mongolia returned to normal production after autumn maintenance, this did not reverse the trend of lower silver ingot output in November. Looking ahead to December, domestic silver supply is projected to rebound slightly as some smelters in Yunnan and Gansu that underwent maintenance resume operations. However, overall ingot supply growth will remain constrained as smelters in Jiangxi continue to implement scheduled maintenance plans. Summary
In November, domestic silver ingot inventories continued the destocking trend, driven by export profits, constraints in raw material supply, and regional maintenance, among other factors. Currently, the silver market is in a phase where macro tailwinds and fundamental support resonate. Against the backdrop of strengthening expectations for US Fed interest rate cuts, low spot inventories, and steady industrial demand, the strong momentum in silver prices is expected to continue. Market participants should remain vigilant in monitoring changes in US Fed monetary policy, inventory changes, and the actual performance of end-use demand such as PV.