[Price Review] This week, the silver market experienced historic and extreme volatility. The LBMA silver price first recorded its largest single-day drop in history on January 30, then plunged over 15% during trading on February 2, breaking below the $72/oz level, rebounded slightly, and weakened again. This round of volatility was triggered by hawkish policy concerns following the news of "Wash being nominated as the next Fed Chairman," leading to a price collapse as speculative bulls rushed to exit, creating a scenario of longs squeezing longs. In the SHFE silver market, the previously rare backwardation structure narrowed this week as the premium of the Shanghai market over LBMA widened, and imported silver ingots and crude silver raw materials slowly flowed into the market. However, spot market availability remained tight. The direction of the deferred fee on the gold exchange has consistently been short paying long since December 25, 2025, and the total physical delivery volume remained low. Regarding the gold/silver ratio, it widened significantly during the silver crash, approaching 60 times, and as of February 4, the LBMA gold/silver ratio rebounded slightly to 55 times, significantly deviating from previous lows. Silver exhibited much higher volatility than gold during the deleveraging process.
[Price Forecast] Given the current high-risk environment of extreme volatility in precious metals, speculative funds may continue to enter the market next week. After the violent price swings, silver prices will seek a new equilibrium as the market digests US Fed policy expectations and the repricing of physical and paper silver. From a fund flow perspective, after taking profits, long funds turned to short positions. Some market traders mentioned the possibility of cash settlement being initiated if COMEX physical delivery defaults occur. The pattern of declining inventory and tight supply has not fundamentally reversed. Domestically, physical prices showed unusual premiums compared to both the gold exchange and SHFE prices, with suppliers noticeably reluctant to sell. Spot premiums are expected to see limited declines before the Chinese New Year holiday. As downstream industries gradually shut down for the holiday and just-in-time procurement concludes, silver price premiums may gradually pull back. Subsequent attention should remain on geopolitical disturbances and guidance from US Fed officials' speeches regarding real interest rate expectations.
[Key Data]
Bullish: US January ISM Manufacturing PMI came in at 52.6, higher than the previous value and expectations.
US January ADP Employment Change came in at 22,000, lower than the previous value and expectations.
US EIA Crude Oil Inventories for the week ending January 30 came in at -3.455 million barrels, lower than the previous value and expectations.
Bearish:
Eurozone January Services PMI Final came in at 51.6, lower than the previous value and expectations.
Key data and macro news releases to watch next week include:
This Friday, the US will release the January Nonfarm Payrolls report and unemployment rate data, but special note is required as the US Bureau of Labor Statistics has warned that partial government shutdown may cause delays in this data release. Several US Fed officials are scheduled to speak intensively, including Atlanta Fed President Bostic, who will speak on the economic outlook.
