Silver prices saw a significant correction on November 5th. The average price of spot silver No. 1 on CCMC was RMB 11,190/kg, down RMB 160; the silver AG 2512 on Shanghai Futures Exchange closed at RMB 11,216/kg, a decrease of 1.26%. This adjustment was primarily driven by stronger US dollar and a policy divergence within the Federal Reserve, while the medium- to long-term supply-demand gap continues to underpin the market.
In the short term, the sharp rebound of the US dollar index is the direct driver. The ICE US Dollar Index broke above the 100 mark to reach a near three-month high of 100.25 points, reducing the attractiveness of dollar-denominated silver assets. Hawkish and dovish divisions within the Federal Reserve have exacerbated volatility, with several officials holding divergent positions. Stephen Miran called for a 50 basis point rate cut, while Jeff Schmid and others opposed further cuts, reducing the probability of a 25 basis point rate cut in December to 67.3%, weakening expectations for continued monetary loosening.
Domestic and international markets exhibited a "simultaneous decline but different magnitudes" characteristic, with silver prices on Shanghai Futures Exchange experiencing a more significant drop. Domestic inventories increased by 23 tons to 8,950 tons, coupled with flight to safety, causing the silver sector to plummet by 2.92%. Internationally, cushioned by continuous declines in COMEX inventories and industrial demand, Loco London spot silver price decline narrowed to 1.18%.
The medium- to long-term supporting logic remains intact. Global silver has experienced a supply deficit for four consecutive years, with the gap widening in 2024 and structural shortages continuing in 2025. New capacity additions in major silver producers are limited. Meanwhile, demand has surged, reaching 1.2 billion ounces globally in 2024, with industrial silver use increasing by 7% year-on-year to 700 million ounces, led by robust growth in the photovoltaic and new energy vehicle sectors. In addition, the Federal Reserve's long-term easing policy direction remains unchanged, and the interest rate cut cycle provides fundamental support for precious metals.
In the short term, the market will be influenced by the US dollar and policy signals. For main silver contracts on Shanghai Futures Exchange, attention should be paid to the support level of RMB 11,000/kg and the resistance level of RMB 11,400/kg. The market should also monitor Mary C. Daly's speech and US CPI data. In the medium to long term, the focus is on photovoltaic installations, electric vehicle sales, and Loco London silver leasing rates. If the supply-demand gap widens and easing measures are restarted, silver prices are expected to regain an upward trajectory.