UBS Adjusts Silver Price Forecasts#
UBS has recently lowered its silver price forecasts for various future dates. The bank attributes this change to weaker investment demand, reduced industrial usage, and an increase in silver supply from mines.
New Price Targets#
The updated forecasts are as follows: silver prices are now expected to be $85 by the end of June, down from $100; $85 for September, reduced from $95; $80 for December, down from $85; and $75 for March 2027, lowered from $85. Currently, spot silver prices are trading around $73.80.
Supply and Demand Dynamics#
UBS's revision comes after a reassessment of the silver market's supply and demand balance. The bank now predicts that the silver market deficit for 2026 will narrow to about 60-70 million ounces, a significant decrease from the previous estimate of around 300 million ounces. The strategists, Wayne Gordon and Dominic Schnider, noted that weaker demand from solar energy applications and higher prices are impacting the demand for silver in jewelry and silverware, potentially reducing demand by about 50 million ounces.
On the supply side, UBS anticipates that mine output will increase to approximately 850 million ounces.
Investment Demand Declines#
UBS has also pointed out a decline in investment demand, with total known ETF holdings dropping by nearly 70 million ounces to around 794 million ounces. Additionally, net speculative futures positions have decreased to just above 100 million ounces. Consequently, UBS has adjusted its full-year investment demand estimate from over 400 million ounces to 300 million ounces, which it considers generous given the current outflows.
Future Outlook#
Despite these adjustments, UBS remains cautious about making more aggressive cuts, citing gold as a stabilizing factor for silver prices. The bank expects the gold-silver ratio to trend towards 75-80 over time. UBS continues to recommend selling volatility instead of holding long positions, noting that while implied volatility has decreased from earlier this year, it remains high compared to historical levels.