Silver futures hit a new high, while China's inventory is at a near ten-year low

Silver is becoming the new focus of the commodity market. Amid a series of tightening supply signals, silver futures prices have reached new highs. On Friday, silver futures prices on the New York Mercantile Exchange rose by 0.57% to $53.93 per ounce.

The direct reason for the price increase is the growing market concerns about supply. According to Wind data, the silver inventory at the Shanghai Gold Exchange fell by 58.83 tons in the week of November 24, reaching 715.875 tons, the lowest level since July 3, 2016. On November 25, although the inventory barely increased by 21.3 tons, it still remained at a near ten-year low.

According to Jiemian News, due to concerns about cross-border shipping costs caused by tariffs, this year, commodities such as gold, silver, and copper have experienced a phenomenon of "cross-border migration" arbitrage between major warehouses in New York and London ahead of the tax increase deadline. ING's Warren Patterson and Ewa Manthey stated that the trigger for these shipments was a recent supply tightness that once pushed silver prices to historical highs. Data shows that China's silver exports surged to over 660 tons in October, setting a historical record.

Meanwhile, the entire precious metals market is also supported by the macro environment. Traders generally bet that the U.S. Federal Reserve will cut interest rates in December, boosting the attractiveness of non-yielding assets, including silver. This expectation provides a solid foundation for precious metal prices and intensifies the price-driving effect of tightening supply.

Surge in Chinese Exports, Inventory Drops to Low Point

The dynamics of the Chinese market are the core driving force behind the recent rise in silver prices. According to ING analysts, the sharp consumption of China's silver inventory is directly related to the recent large-scale exports to London.

Due to statistical tax premiums, prices for New York commodities are often higher than those in London and other regions, and there exists a price difference between the two places before the tariff policy is implemented, creating arbitrage opportunities and prompting traders to transport goods to U.S. warehouses for arbitrage.

The consequence of this is that the inventory of various metals on the London Metal Exchange (LME) once hit a bottom, further triggering term arbitrage behavior, and the logic of forced liquidation has been continuously strengthened, leading to a certain liquidity crisis in some metal markets. This trend peaked in October, with exports exceeding 660 tons that month, refreshing the historical record and directly leading to a rapid decline in domestic inventory.

"The domestic trading of silver and non-ferrous metals will be affected to some extent by the transfer of overseas inventory to the United States, and the impact is bidirectional, mainly reflected in prices and arbitrage behavior," said Zhou Ji, senior director of the Nanhua Futures Research Institute, to Jiemian News reporters

Interest Rate Cut Expectations Support Precious Metals Market

The rise in silver is not an isolated event but a reflection of the entire precious metals sector strengthening under expectations of loose monetary policy. Market expectations for a rate cut by the Federal Reserve in December are heating up, providing support for non-yielding assets like gold. Soojin Kim from Mitsubishi UFJ Financial Group (MUFG) noted that although New York gold futures dipped 0.1% to USD 4,196.20 per troy ounce, overall prices remain high.

This expectation of a rate cut has been reinforced by dovish comments from Federal Reserve officials. Federal Reserve Governor Christopher Waller stated that the labor market is sufficiently weak, providing reason for another rate cut in December. New York Fed President John Williams also believes there is room for further rate cuts.

Additionally, according to media reports, Kevin Hassett, a senior economic advisor to President Trump who is considered to hold a dovish stance, has become a popular candidate for the next Federal Reserve Chair, further boosting market confidence in low interest rates. Analysts from ANZ Research stated in a report that lower rates are favorable for precious metals like gold.

Supply Shortages May Push Up Copper Prices

The theme of supply tightness is also fermenting in the industrial metals market, particularly copper. Eun Young Lee from DBS Group Research stated in a report that the worsening copper supply shortage could drive prices higher. The analyst predicts that due to a supply gap that may expand to 316,000 tons next year, the average price of copper could rise by 3.1% to USD 9,900 per ton by 2026. Copper demand is continuously driven by investments in data centers and power grids, while supply growth from mines is constrained by production disruptions and declining ore grades.

Signs of supply tightness have already emerged in commercial negotiations. ANZ analysts noted that Chilean copper producer Codelco is seeking to significantly raise the premium on its 2026 annual contracts from USD 89 per ton this year to USD 350 per ton. Under the dual effects of tightening supply and steady demand, DBS believes that Chinese copper mining companies may benefit, listing Zijin Mining and MMG as preferred choices. Among them, MMG is seen as an ideal investment target in the copper market due to 74% of its revenue coming from copper operations