The silver market has experienced severe volatility recently. As of just before the close on May 14, spot silver broke below the $85 per ounce level, posting a single-day decline of over 3%. At the same time, UBS released its latest research report, significantly lowering its silver price forecasts and triggering widespread market attention.
Three key reasons behind UBS’s bearish view on silver
In their report, UBS strategists Wayne Gordon and Dominic Schnider clearly stated that the supply-demand dynamics for silver in 2026 will undergo a fundamental shift. While the market had widely expected silver to post a fourth consecutive year of supply deficits, UBS’s latest forecast shows that this year’s supply gap will narrow dramatically from a previous estimate of 300 million ounces to just 60–70 million ounces. This “cliff-edge” contraction is the root cause of fading upside momentum for silver prices.
Specifically, demand is facing a triple blow: First, photovoltaic silver demand is weakening due to elevated silver prices — although solar cells have been the largest incremental source of silver consumption in recent years, rising silver paste costs per watt are accelerating manufacturers’ shift toward “low-silver” technology alternatives. Second, demand for silverware and jewelry is also being suppressed by high prices, especially in price-sensitive emerging markets such as India. Third, investment demand has cooled significantly, with total known silver ETF holdings dropping by nearly 70 million ounces to around 794 million ounces, while net speculative positioning in futures has also fallen sharply.
Based on this, UBS has cut its full-year investment demand estimate from above 400 million ounces to 300 million ounces. Accordingly, its end-Q2 2026 silver price target was lowered from $100 to $85, the end-September target from $95 to $85, the year-end target from $85 to $80, and the March 2027 forecast from $85 to $75.
Gold provides a floor, but sideways consolidation remains likely
Notably, UBS has not turned completely bearish on silver. The report points out that gold is still expected to trend higher, and the recent increase in the correlation between gold and silver prices provides a certain floor for silver. The gold-silver ratio is expected to move toward the 75–80 range (currently around 84–85). In other words, if gold prices continue to rise, the downside for silver may be limited.
Nevertheless, overall UBS believes silver prices will trade “broadly sideways.” In the current environment, the strategists continue to favor selling volatility over holding outright long positions. Although implied volatility has come down significantly from the near-150% historical extreme seen in February, it remains elevated. Selling downside risk to harvest carry over the next three months is seen as an attractive strategy.
How should investors gauge the outlook for silver prices?
For retail investors, the following key signals should be closely monitored at this stage:
Federal Reserve policy path: US April PPI recorded the largest increase in four years. If inflationary pressures force interest rates to remain high or rise further, that would continue to pressure silver, a non-yielding asset.
Gold price trend: If the gold-silver ratio breaks above the 85–90 range, silver may face catch-up downside risk; conversely, if gold breaks above its previous highs, silver could see follow-through gains.
Actual photovoltaic demand data: It is essential to closely track procurement trends at major silver paste producers and module manufacturers. Any faster-than-expected technology substitution would alter the demand model.
Position changes: Whether the trend of sustained ETF outflows reverses is a key indicator of whether investment demand can stabilize.
In summary, silver’s “supply story” is fading, and the investment logic has shifted from chasing deficits to defending against sideways consolidation. In the short term, UBS’s cautious view deserves attention, and the risk of blindly bottom-fishing remains significant. A more rational approach would be to lower outright directional expectations, use volatility tools to hedge, or wait until the gold-silver ratio moves back into a more favorable range before positioning.