Silver’s rally case is losing momentum, according to UBS, which has sharply lowered its price forecasts after reassessing the metal’s supply-demand balance. The bank now expects weaker investment demand, softer industrial consumption, and a modest increase in mine supply to dramatically reduce the market deficit in 2026, limiting the scope for further gains.
Strategists Wayne Gordon and Dominic Schnider said the silver market remains fundamentally tight, but not nearly as tight as previously assumed. As a result, UBS no longer sees the kind of upside that had supported its earlier bullish projections.
UBS now forecasts silver at $85 by the end of Q2 2026, down from its previous estimate of $100. It also lowered its September target to $85 from $95, its year-end target to $80 from $85, and its March 2027 forecast to $75 from $85.
The bank’s revised outlook follows a major downgrade in its estimate of the 2026 supply deficit. UBS now expects the market shortfall to narrow to around 60–70 million ounces, compared with its earlier forecast of 300 million ounces.“Consistent with the smaller deficit, we have trimmed our price outlook across all forecast horizons. In our base case, we expect silver to trade broadly sideways,” the strategists said.
A key reason behind the weaker outlook is slowing demand in several major end markets.UBS expects photovoltaic demand to soften in 2026, with elevated silver prices discouraging use in solar applications. At the same time, higher prices are expected to weigh on demand for silverware and jewelry. Together, the bank estimates these segments could cut demand by roughly 50 million ounces.
Investment demand has also deteriorated. UBS noted that total known silver ETF holdings have fallen by nearly 70 million ounces to around 794 million ounces, while net speculative futures positioning has retreated to just above 100 million ounces. In response, the bank cut its full-year investment demand estimate from more than 400 million ounces to 300 million ounces, which it still described as generous given the outflows seen so far this year.
On the supply side, UBS sees a somewhat stronger backdrop. The bank expects mine production to reach around 850 million ounces, helping to ease the pressure that had previously underpinned more bullish price expectations. This combination of softer demand and rising supply helps explain why UBS believes silver’s deficit, while still present, will be far less supportive than before.
Despite the downgrade, UBS did not turn outright bearish on silver. One key reason is gold. The bank said it still expects gold prices to trend higher, which should provide an important floor for silver, especially as the correlation between the two metals has increased. UBS expects the gold-silver ratio to move toward 75–80 over time, suggesting silver could continue to find support even if its standalone fundamentals soften.
Given the revised outlook, UBS said it prefers selling volatility over holding outright long silver positions. Although implied volatility has come down from the extreme levels seen earlier this year, when one-month realized volatility nearly reached 150% in February, it remains historically elevated. That leaves room for options-based strategies, particularly those designed to harvest carry.“We view selling downside risk to harvest carry over the next three months as attractive,” the analysts said.
Silver prices were under pressure on Thursday, with spot silver last trading near $84.69 per ounce, down 3.21% on the day. Earlier, prices had fallen to around $85.6, as investors focused on the high-stakes meeting between US President Donald Trump and Chinese President Xi Jinping.
The geopolitical backdrop added another layer of uncertainty. Trump said Xi had agreed to help Iran “with whatever” it needs, while Xi warned that tensions over Taiwan could strain US-China relations and even risk conflict. At the same time, Iran’s foreign minister vowed that Tehran would maintain control over the strategic Strait of Hormuz.
Markets were also digesting stronger-than-expected US import and export price data, which followed earlier hot consumer and producer inflation reports. That combination has led traders to largely price out US rate cuts this year, with markets now assigning nearly a 30% chance of a rate hike by December. Higher rate expectations typically weigh on precious metals by increasing the opportunity cost of holding non-yielding assets. Gold also softened, slipping back below $4,700 per troy ounce, while silver dropped sharply before recovering some ground. Even so, silver remained more than 5% above last Friday’s London benchmark at one stage, underlining its ongoing volatility.
While UBS sees weaker investment and industrial demand ahead, not everyone is convinced silver’s bullish story is fading. Recent trade data showing record monthly silver imports into China has strengthened the case that physical demand remains robust. Bruce Ikemizu of the Japan Bullion Market Association said it is difficult to conclude that silver prices could keep rising based on supply-and-demand fundamentals.
According to Ikemizu, a silver refinery in China is currently processing 3–5 tonnes per day of investment-grade 1kg silver bars, roughly equivalent to a full month’s normal production, with those bars selling almost immediately. Shanghai silver prices also traded at a premium of nearly $11 over London quotes, including VAT, the strongest premium in almost a month, indicating firm local demand.
At the same time, silver lease rates in London eased to 0.9% annualized for one-month deals, down from a recent seven-week high. While that suggests better bullion availability in London than during last year’s severe supply squeeze, lease rates remain an important gauge of physical tightness in the market. Silver’s long-term appeal continues to rest partly on its industrial utility. The metal remains essential in electronics, solar panels, and other applications requiring high electrical conductivity. Even with UBS anticipating weaker photovoltaic demand due to elevated prices, industrial demand is still broadly supportive. Silver also retains its role as a traditional investment asset alongside gold, especially during periods of geopolitical instability, inflation concerns, and currency volatility.
In the near term, silver appears caught between two competing narratives. On one side is UBS’s argument that the market deficit is shrinking faster than expected, reducing the metal’s upside potential and pointing to a broadly sideways trading environment. On the other side is evidence of continued physical buying, especially in China, and the possibility that rising gold prices could continue to underpin silver.
Like all precious metals, silver remains highly sensitive to a wide range of factors, including supply and demand, interest rates, inflation, currency movements, geopolitical developments, and speculative positioning. Real-time pricing in global hubs such as London, New York, Hong Kong, and Shanghai continues to reflect this constant push and pull. For now, UBS’s message is clear: silver is no longer the high-conviction upside trade it once appeared to be. The market may still be in deficit, but with softer demand and stronger supply expected in 2026, the metal’s path forward looks less like a breakout and more like a grind.