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Investing.com -- UBS strategists raised their forecasts for silver prices to $42/oz across all tenors through June 2026, citing stronger investment demand and a recovery in industrial activity.
Silver prices have gained nearly 8% in July, lifted by a weaker U.S. dollar (USD) and fresh investor interest triggered by tariff threats from the Trump administration. Year-to-date, the white metal has jumped 34%, outperforming even gold and palladium.
“With these new forecasts, we reiterate our preference to stay long silver and view price pullbacks as buying opportunities,” the strategists Dominic Schnider and Wayne Gordon wrote in a note.
Speculative positions in silver futures have surged, with net longs up by 96 million ounces since late 2024, now totaling nearly 297 million ounces.
Exchange-traded fund (ETF) inflows remain solid, bringing total known holdings to around 786 million ounces. Regional trends in retail demand show strength in India and a recovery in Europe.
“Conversely, the U.S. market has faced headwinds, with retail demand estimated to have fallen by at least 30% year-to-date,” the strategists noted.
UBS pointed to a supportive backdrop of dollar diversification, reduced macro risk, and industrial tailwinds—especially from photovoltaics and the auto sector. The supply side remains stable, with mine output expected to rise 1.9% this year, led by North America and Africa.
Silver is also in its fifth consecutive annual deficit, estimated at 118 million ounces for 2025. This brings the cumulative shortfall since 2021 to around 796 million ounces, reinforcing the positive price outlook.
The U.S. dollar outlook remains a key driver for silver prices, strategists said. With the bank now expecting further dollar weakness into 2026, the probability of higher silver prices has increased.
“Silver’s negative correlation with the USD underpins our revised forecast of $42/oz (up from $38/oz),” the strategists continued.
They added that the gold-silver ratio could fall to 85 or below if economic growth picks up toward year-end, noting silver’s historical tendency to overshoot that level.
With the new forecast in place, the team maintains its bullish stance on silver, viewing “pullbacks to $37.25/oz or below as attractive entry points.”
The strategists also continue to favor selling downside risk to generate yield, noting that the directional view on the white metal outweighs current option volatility, which remains “benign by historical standards.”