UBS Lowers Its Preferred Silver Buy Zone
UBS has reduced the price range it considers attractive for buying silver during market pullbacks. The change comes as silver struggles to establish a stable floor following a sharp decline in recent weeks.
Silver traded near $76 per ounce in early June. However, by mid-July, the metal had fallen to around $56.
According to UBS strategist Dominic Schnider, escalating tensions in the Middle East and rising oil prices have increased concerns about inflation and higher interest rates. As a result, precious metals, including silver, have remained under pressure.
New Silver Buy-the-Dip Range
UBS previously viewed prices of $55 per ounce or lower as an attractive entry point. The bank has now lowered its preferred buy-the-dip range to between $48 and $50 per ounce.
Nevertheless, Schnider believes silver may not remain at those levels for long.
UBS adjusted its target because investment demand has been weaker than the bank initially expected. Therefore, silver may need to fall further before attracting stronger buying interest.
Silver ETF Demand Remains Weak
Investment demand for silver has remained relatively subdued throughout the year.
Silver exchange-traded fund holdings have declined by more than 38 million ounces since the beginning of January. By mid-July, total holdings had fallen to approximately 784 million ounces.
However, there have recently been signs of stabilization. ETF holdings increased by around 1.86 million troy ounces during July.
UBS believes this increase may indicate that some investors are using the recent decline as an opportunity to buy silver at lower prices. Meanwhile, futures market positions have remained broadly stable.
Silver Faces Near-Term Pressure
Schnider expects several headwinds to continue affecting silver prices in the short term.
These include geopolitical tensions in the Middle East, higher opportunity costs, a strong US dollar and the possibility of a hawkish Federal Reserve.
Higher interest rates can reduce the appeal of precious metals because assets such as silver do not generate interest income. At the same time, a stronger dollar can make silver more expensive for buyers using other currencies.
UBS does not expect the Federal Reserve to begin cutting interest rates until December 2026 or the first quarter of 2027.
According to Schnider, the current macroeconomic environment gives investors little reason to significantly increase their long positions in silver.
UBS Remains Bullish on Silver
Despite its cautious short-term outlook, UBS still expects weakness in silver prices to be temporary.
The bank believes future Federal Reserve rate cuts could eventually support precious metals. In addition, UBS considers the US dollar expensive compared with several Asian currencies.
Industrial demand may also remain resilient, even if silver prices stay elevated. Silver is widely used in industries such as electronics, solar energy and manufacturing.
UBS forecasts silver at $65 per ounce by September. It then expects the price to rise to $70 by December.
Looking further ahead, the bank projects silver could reach $75 per ounce by March 2027 and remain near that level through June 2027.
Gold-Silver Ratio Signals Improving Value
UBS is also monitoring the gold-silver ratio, which currently stands slightly above 70.
The ratio measures how many ounces of silver are required to purchase one ounce of gold. A rising ratio usually suggests that silver is becoming cheaper relative to gold.
UBS believes silver’s relative valuation has become more attractive. However, the bank does not yet consider it exceptionally cheap.
According to UBS, a move in the gold-silver ratio above 80 would provide a stronger signal that silver is significantly undervalued compared with gold.
