Silver Weekly Slump of 5.2%: Dual Macro Pressure Combined with Supply-Demand Weakness [SMM Silver Weekly Review]

[Silver Price Review and Forecast]

This week, SMM 1# silver prices generally drifted lower. At the start of the week, prices fell under pressure right after opening, with silver weakening continuously. Mid-week, boosted by a larger-than-expected cooling in US CPI, a brief technical rebound occurred, but the rebound lacked momentum, then pulled back again to hit a new weekly low. The full week saw a cumulative decline of about 5.2%, with a weekly amplitude near 5.5%, and the price center shifted steadily lower.

On the macro front, the landscape was characterized by dual pressure from “escalating geopolitical risks + persistent rate hike expectations.” Geopolitically, the Middle East situation deteriorated sharply—Iran’s Revolutionary Guard announced the closure of the Strait of Hormuz, and the US military launched successive airstrikes on Iran and imposed a maritime blockade, briefly fueling safe-haven sentiment. Meanwhile, the new Fed Chair Warsh made hawkish remarks, and market expectations for a September rate hike continued to strengthen. Mid-week, both US June CPI and PPI data came in cooler than expected, causing the US dollar index to briefly fall below 101, giving precious metals a short reprieve. However, Warsh maintained a hawkish tone, stressing that he was “not satisfied with any inflation indicator,” and several Fed officials reiterated the need for inflation to return to the 2% target. With rate hike expectations intact, silver lacked momentum for a rebound. Overall, bearish factors were dense, and the downward trend for precious metals dominated the entire week.

On the spot side, spot premiums moved further lower this week as silver prices continued to weaken. At the start of the week, a “rush to buy amid rising prices and hold back amid price downturn” mentality emerged, and transactions leaned toward parity. Mid-week, the high end of premiums loosened, with the center shifting to parity to a small discount against TD. Approaching the weekend, the high-end quotes continued to move lower, and premiums narrowed further to around parity, with strong wait-and-see sentiment among downstream players and thin trading. Today (July 16), the premium/discount range is quoted at TD-5 to +5 yuan/kg, with an average of 0 yuan/kg. This week, the spot market maintained a pattern of weak supply and demand, with persistently sluggish transactions.

Looking ahead, attention may be paid to the continuity of Warsh’s hawkish signals in subsequent Fed officials’ remarks, as well as the trajectory of geopolitical conflicts and policy signals from the late-July FOMC meeting. On the spot front, focus on changes in silver warrant inventory.

For next week’s price range, SGE futures are seen with a low at 12,500 yuan/kg and a high at 15,300 yuan/kg; LBMA futures are seen with a low at $48/oz and a high at $65/oz; TD quotes are expected to trade around parity. This week, SMM’s Hong Kong spot premium for silver ingots (against LBMA silver) was at a discount of $0.4 to $0.2/oz, with transaction prices recovering slightly.

[Silver Weekly Data Comments]

On weekly inventory, SMM total social inventory stood at 3,520 mt, with a slight buildup of 4.6% WoW. Among this, combined warrant inventory at the Gold Exchange and SHFE increased by 129 mt WoW. The pace of inventory buildup picked up this week, mainly due to persistently weak consumption, partly caused by a pileup of registered warrants released by banking institutions. In the international market, both LBMA and COMEX inventories remained in a buildup state.

As of July 15, silver ETF holdings were at 14,957 mt, unchanged from the previous data, up 0.44% WoW, and up 1.47% month-over-month. The LBMA gold/silver ratio was 70, and the ratio continued to rise this week.