UBS's latest silver market outlook report indicates that global silver is facing a triple pressure of cooling investment demand, weakening industrial consumption, and recovering mine supply. The market's supply-demand gap is expected to narrow significantly, directly undermining silver's cross-cycle upward momentum. The institution has comprehensively lowered its silver price targets for multiple future time points, noting that only the trend in gold provides a floor for support. The gold-to-silver ratio is expected to gradually return to a reasonable range. Concurrently, the institution proposes a new trading strategy, suggesting that a short-term downward pressure on silver prices has already emerged.
Weakening Physical Demand: Both Photovoltaics and Jewelry Pose a Drag UBS strategists Wayne Gordon and Dominic Schnider analyzed in their research report that maintaining high silver prices through 2026 will significantly suppress demand from the photovoltaic industry and noticeably curb consumption in silverware and jewelry. Comprehensive calculations suggest these two major sectors combined will reduce silver consumption by approximately 50 million ounces, becoming the core factor dragging down physical demand.
Investment Demand Recedes Sharply: ETF and Futures Holdings Decline Simultaneously On the investment front, signs of capital outflows from the silver market are very evident. Globally tracked silver ETF holdings have cumulatively decreased by nearly 70 million ounces, with current holdings falling to around 794 million ounces. Speculative net long positions in the futures market have also contracted significantly, barely maintained above 100 million ounces. Due to the persistent capital outflow, UBS has revised its full-year silver investment demand forecast from over 400 million ounces down to 300 million ounces. The institution admits that, against the backdrop of continued capital withdrawal this year, the 300 million ounce expectation is already a relatively optimistic assessment.
Multi-Period Silver Price Targets Collectively Lowered as Supply-Demand Gap Shrinks Sharply Based on a reassessment of the supply-demand structure, UBS has comprehensively lowered its silver price expectations. It has revised the Q2 2026 price target from the previous $100 per ounce down to $85, the September target from $95 to $85, the year-end 2026 target from $85 to $80, and also lowered the forward price expectation for March 2027 from $85 to $75. On the supply-demand front, the silver market supply deficit for 2026 is projected to narrow to 60-70 million ounces, a precipitous drop compared to the earlier estimate of 300 million ounces. Strategists stated that with the significant narrowing of the supply-demand gap, price outlooks across all time horizons have been revised downward. Under the base scenario, silver is expected to trade mainly within a range with sideways consolidation, making a sustained, significant rally unlikely.
Gold Remains the Sole Support as Gold-to-Silver Ratio Gradually Normalizes UBS noted that it is precisely the stable performance of gold that has prevented a deeper correction in silver prices. The strategists stated they remain optimistic about gold's medium-to-long-term upward trend, which can provide an important valuation anchor for silver. The correlation between gold and silver price movements has continued to strengthen recently. It is anticipated that the gold-to-silver ratio will gradually move towards a more reasonable range of 75 to 80. The supply side is showing overall marginal improvement, with full-year silver mine production expected to rise to 850 million ounces, further alleviating market tightness.
Trading Strategy Shifts as Silver Prices Show Continued Short-Term Weakness In terms of trading approach, Gordon and Schnider favor selling volatility strategies and do not recommend a one-sided long position. Although silver's implied volatility has retreated from its yearly high, the actual realized volatility in February this year approached 150%, and current levels remain within a historically high range. Analysts believe that selling downside risk and earning carry yield presents good allocation value over the next three months. On Thursday, spot silver prices continued to trend lower, falling 4.53% to close at $83.49 per ounce. As of 10:30 Beijing time Friday, the price once hit a four-session low of $80.60 and is currently trading around $81.05 per ounce, further confirming the weak market structure.
Summary Overall, both industrial and investment demand for silver are weakening, while mine supply is steadily increasing. The supply-demand deficit is shrinking dramatically, thoroughly capping silver's medium-to-long-term upside potential. UBS has lowered its silver price targets across all time horizons, leaving gold as the only limited source of support. The market is likely to be dominated by weak, range-bound consolidation. Persistent capital outflows combined with a loosening fundamental backdrop are putting clear pressure on short-term silver prices. The trading logic has shifted from one-sided long positions to volatility arbitrage. Going forward, close attention should be paid to gold price movements and changes in physical demand.
Spot silver was quoted at $81.05 per ounce.
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