[Price Review]
This week (6.1-6.4), silver continued its sluggish drift lower, with the overall center moving down and both international and domestic futures weakening in tandem. On the macro front, CME FedWatch showed that the probability of the Fed keeping rates unchanged in June was 98.4%, with a 1.6% chance of a rate cut; for September, the probability of rates staying on hold stood at 71.1%, while the probability of a rate hike was 27.8%. On the data front, US May ADP employment exceeded expectations, with private sector payrolls increasing by 122,000 in May, the largest monthly gain since December last year. The focus was on the US May non-farm payrolls data due the following evening. On the geopolitical front, the US-Iran conflict remained unresolved, with Trump stating that negotiations were progressing smoothly and nearing a deal, while the maritime blockade against Iran could extend to September; the Israeli prime minister indicated tactical differences but aligned strategic goals with the US, while the Israeli military said there would be no ceasefire in Lebanon. On the industrial demand side, mainstream quotations for national standard silver ingots in the Shanghai market against TD remained at a slight discount, but the discount continued to narrow WoW, with quotes gradually moving toward parity. Transaction quotes mostly fell within a TD discount of 20-0 yuan/kg on the SGE. As silver prices declined during the week, downstream consumption recovered slightly WoW, easing selling pressure at low levels, but overall consumption remained sluggish. On the inventory front, downstream consumption and investment sentiment remained cautious, with no significant improvement expected in the near term. Social inventory of silver ingots in Shanghai and Shenzhen continued to edge higher. On the gold/silver ratio, as of June 3, the LBMA gold/silver ratio widened further this week from 62.3 to 63.8.
[Key Data]
Bearish
Warsh officially assumed the role of Fed Chairman with a clear hawkish tone; attention should be paid to subsequent speeches by Fed officials.
US ADP data showed the resilience of the US labor market exceeded expectations.
India again tightened silver import controls, dealing a heavy blow to physical consumption.
Bullish:
The energy crisis in Peru persists, with a national state of emergency extended to year-end. Twelve large mines have implemented staggered production, and May silver output is estimated to decline by 5%-8%. The global supply-demand gap remains, providing some bottom support to silver prices.
[Near-term Focus]
June 5: US May non-farm payrolls report
June 12: US May CPI data
June 16-17: Fed June FOMC meeting and Warsh’s post-meeting press conference
Key focuses: speeches by Fed officials, latest progress in US-Iran negotiations, and details of India’s silver import quota implementation.
[Price Forecast]
Silver is expected to consolidate at lows next week. Silver prices remain in a high-pressure macro environment, and the earlier supply-disruption narrative has largely faded. Focus will be on the non-farm payrolls data due tomorrow night, Fed officials’ speeches, and the direction of US-Iran negotiations. It is recommended to mainly wait and see on operations, pending clear stabilization signals. On the China fundamentals side, downstream buying sentiment is relatively cautious; overall consumption has slightly recovered owing to silver prices holding at short-term lows. Selling pressure on spot cargo at low levels in the market has eased somewhat, but overall trading remains sluggish. Investment sentiment has also not seen a significant rebound. The social inventory of spot silver ingot continues to edge higher. It is expected that the mainstream traded discount for spot cargo in the market will remain within a range of a 10-0 yuan/kg discount to the SGE TD price.
