UBS strategists have issued a revised forecast for silver, indicating a significantly narrowed supply deficit due to weaker investment demand, softer industrial consumption, and increased mine supply. This development diminishes silver's upside potential across multiple timeframes.
Strategists Wayne Gordon and Dominic Schnider noted in a report that for 2026, they anticipate demand from the photovoltaic sector will soften due to elevated prices. Similarly, higher prices are expected to dampen demand for silverware and jewelry. Collectively, these channels are estimated to reduce demand by approximately 50 million ounces.
Regarding investment demand, UBS analysts pointed out that total known exchange-traded fund (ETF) holdings have decreased by nearly 70 million ounces to about 794 million ounces, while net speculative futures positions have also retreated to just over 100 million ounces. Consequently, the bank has lowered its full-year investment demand forecast from over 400 million ounces to 300 million ounces, describing this expectation as "still generous considering year-to-date outflows."
UBS now forecasts the silver price to reach $85 per ounce by the end of the second quarter of 2026, down from a previous projection of $100. The September price target has been revised from $95 to $85, the year-end target from $85 to $80, and the March 2027 forecast from $85 to $75.
These adjustments are based on a reassessment of the overall market supply-demand imbalance. UBS now expects the silver market supply deficit in 2026 to shrink to approximately 60-70 million ounces, a substantial reduction from the prior estimate of 300 million ounces. The strategists stated, "In line with the smaller deficit, we have lowered our price outlook across all forecast timeframes. In our base case, we expect silver prices to largely move sideways."
UBS noted that gold acts as a stabilizing factor for silver prices, preventing the bank from making more significant downward predictions. The strategists added, "We still expect gold prices to trend higher, which will provide an important anchor for silver," highlighting a recent strengthening in the correlation between gold and silver prices. The bank anticipates the gold-to-silver ratio will converge toward a range of approximately 75 to 80 over time.
On the supply side, strategists view the backdrop as "slightly stronger," with mine production expected to reach around 850 million ounces.
Regarding trading strategy, Gordon and Schnider indicated they still favor selling volatility over holding direct long positions. Although implied volatility has retreated significantly from earlier this year—when one-month realized volatility approached 150% in February—it remains at historically elevated levels. The analysts stated, "We view selling downside risk to earn carry over the next three months as an attractive strategy."