UBS Raises Silver Price Targets to $42/oz on Strong Investment Demand

Precious Metals Analysis: Swiss Bank Upgrades Silver Outlook Through 2026

UBS strategists have significantly revised their silver price forecasts upward, setting a new target of $42 per ounce across all time horizons extending through June 2026. The adjustment reflects growing investment appetite and expectations of renewed industrial activity in key sectors.

Strong Performance Drives Optimism

Silver has demonstrated exceptional strength in recent trading, climbing nearly 8% during July alone. This impressive performance stems from a combination of U.S. dollar weakness and renewed investor interest sparked by trade policy uncertainties under the current administration.

The white metal’s year-to-date performance has been particularly remarkable, surging 34% and outpacing other precious metals including gold and palladium. This substantial gain has positioned silver as one of the standout performers in the commodities complex.

Investment Demand Surge

The revised price outlook is supported by compelling demand metrics across multiple investor categories:

Futures Market Activity

Speculative positioning in silver futures contracts has experienced dramatic growth, with net long positions increasing by 96 million ounces since late 2024. Current net long positions have reached nearly 297 million ounces, indicating strong institutional and speculative interest.

ETF Inflows Continue

Exchange-traded fund investments remain robust, with total known silver holdings reaching approximately 786 million ounces. This sustained inflow pattern demonstrates consistent institutional and retail investor appetite for silver exposure.

Regional Demand Patterns

Global retail demand shows mixed regional trends:

• India: Displaying continued strength in silver purchases
• Europe: Showing signs of recovery in retail demand
• United States: Facing headwinds with retail demand estimated to have declined by at least 30% year-to-date

Fundamental Supply-Demand Dynamics

Supply Outlook

The supply side remains relatively stable with global mine production expected to increase by 1.9% this year. North America and Africa are leading this production growth, providing adequate supply to meet baseline demand requirements.

Persistent Deficits

Silver markets continue to experience structural deficits, now in their fifth consecutive year of supply shortfalls. The 2025 deficit is projected at 118 million ounces, contributing to a cumulative shortage of approximately 796 million ounces since 2021.

This ongoing supply-demand imbalance provides fundamental support for higher prices and reinforces the positive long-term outlook for the precious metal.

Industrial Demand Drivers

UBS analysts highlight several industrial sectors providing tailwinds for silver demand:

Renewable Energy Sector

The photovoltaic (solar panel) industry continues to drive significant silver consumption, with the renewable energy transition creating sustained industrial demand.

Automotive Industry

The automotive sector, particularly electric vehicle production and associated technologies, represents another growth area for silver industrial applications.

Currency and Macro Factors

Dollar Weakness Expected

UBS expects continued U.S. dollar weakness extending into 2026, which historically benefits precious metals priced in dollars. Silver’s negative correlation with the USD supports the bank’s revised $42/oz forecast, up from the previous target of $38/oz.

Macro Environment

The analysts point to several supportive macro conditions:

• Dollar diversification trends
• Reduced macroeconomic risk perception
• Industrial sector recovery momentum

Gold-Silver Ratio Analysis

The strategic team suggests the gold-silver ratio could decline to 85 or below if economic growth accelerates toward year-end. Silver has historically demonstrated a tendency to overshoot this ratio level during periods of economic expansion, potentially providing additional upside opportunity.

Investment Strategy Recommendations

Bullish Positioning Maintained

UBS strategists, including Dominic Schnider and Wayne Gordon, maintain their bullish stance on silver and recommend viewing price pullbacks as attractive buying opportunities. Specifically, they identify entry points at $37.25/oz or below as compelling investment opportunities.

Options Strategy

The team continues to favor selling downside risk to generate yield, noting that their directional bullish view on silver outweighs current option volatility levels, which remain “benign by historical standards.”

Market Outlook

The combination of strong investment demand, persistent supply deficits, supportive industrial trends, and favorable currency dynamics creates a compelling case for higher silver prices. The upgraded $42/oz target reflects confidence in these multiple supportive factors converging over the forecast period.

Key Factors to Monitor

• U.S. dollar strength/weakness trends
• Industrial demand from renewable energy and automotive sectors
• Investment flow patterns across ETFs and futures markets
• Global economic growth trajectory
• Supply response from major producing regions

Risk Considerations

While the outlook appears positive, investors should monitor potential headwinds including:

• Significant U.S. dollar strength that could pressure precious metals
• Economic slowdown that might reduce industrial demand
• Major supply increases that could alleviate current deficit conditions
• Shifts in investor sentiment toward risk assets

The revised UBS forecast represents a significant vote of confidence in silver’s prospects, backed by fundamental supply-demand dynamics and supportive macro conditions extending through 2026.

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