China Silver Fund Plunges After String of Moves to Quell Frenzy

Core Viewpoint - The value of China's only pure-play silver fund, UBS SDIC Silver Futures Fund LOF, experienced a significant decline of 10%, marking the end of a rapid bull run that had raised concerns from the fund's manager about sustainability [1][2]. Group 1: Fund Performance and Management Actions - The UBS SDIC Silver Futures Fund LOF saw a dramatic drop after weeks of gains, which were described as "unsustainable" by the fund's manager [2][4]. - The fund had previously hit its maximum daily limit of 10% for three consecutive days, prompting UBS SDIC Fund Management Co. to impose stricter rules on new subscriptions, reducing the limit for Class C shares from 500 yuan ($14.25) to 100 yuan [3]. - The fund has recorded an impressive gain of nearly 220% this year, significantly outpacing the 128% increase in Shanghai-traded silver futures [6]. Group 2: Market Context and Investor Sentiment - The surge in the silver fund's value was driven by heightened global interest in precious metals, with spot silver reaching a record high of $72.70 an ounce and on track for its best annual performance since 1979 [2][5]. - The premium of the fund over its underlying assets, silver contracts on the Shanghai Futures Exchange, rose to nearly 62%, up from 7% at the beginning of the month, indicating a potential risk of steep losses if silver futures decline [4][6]. - The intense investor interest in silver has also been reflected in the performance of other precious metals like gold, platinum, and palladium, as well as in other Chinese funds linked to these metals [5].