UBS refreshes its silver prices outlook for 2025

UBS forecasts silver prices to reach $40/oz in the coming months, driven by demand for dollar alternatives, ETF inflows, and a weakening dollar, revising its near-term target to $38/oz. Silver's 26% YTD gain is supported by strong momentum and a breakout above technical resistance, with the relatively small market size amplifying the impact of investor allocation shifts. A projected 149 million ounce market deficit and potential for the gold-silver ratio to fall below 90x further underpin UBS's bullish outlook, recommending long positions and strategies to monetize downside risk.

Analysis

UBS has issued a strongly bullish forecast for silver, anticipating prices could reach $40 per ounce in the coming months, with an immediate revised near-term target of $38/oz. This optimism is underpinned by several factors, including robust investor demand for U.S. dollar alternatives, persistent ETF inflows which have added 35.6 million ounces year-to-date to reach total holdings of approximately 751 million ounces, and an expected weakening of the U.S. dollar driven by anticipated interest rate cuts. Silver's notable 26% year-to-date performance, which has surpassed expectations, is further supported by strong momentum trading and a significant technical breakout above the $34.60 resistance level. The relatively small size of the silver market, estimated at just 11% of the gold market, implies that even modest shifts in investor allocations can exert substantial influence on prices. Reinforcing this outlook, futures market positioning shows a considerable net long stance of roughly 304 million ounces, an increase of 103 million ounces since late 2024. According to Silver Institute projections, the market is poised for its fifth consecutive annual deficit, estimated at around 149 million ounces for the current year, with global demand at 1.2 billion ounces against a supply of 1.05 billion ounces. UBS also highlights the potential for the gold-silver ratio to decline below 90x, enhancing silver's relative attractiveness, and emphasizes that strong private investor interest and structural market tightness are key drivers, diminishing the immediate necessity for substantial industrial or reserve manager buying.

Key Decisions for Investors

• Consider maintaining or initiating long exposure to silver, aligning with the strong bullish forecast and identified fundamental and technical drivers.
• Closely monitor U.S. dollar trends, central bank interest rate expectations, and silver ETF flow data as key indicators influencing the metal's price.
• For investors with appropriate risk mandates, evaluate option strategies such as selling puts on silver to potentially benefit from elevated volatility and the positive price outlook.
• Track the gold-silver ratio for a potential break below 90x, which would further support silver's relative investment case.
• Acknowledge the potential for heightened volatility in silver due to its comparatively smaller market size, where shifts in investor allocations can have a pronounced price impact.