UBS has trimmed the level at which it considers buying the dip in silver to $48-50 an ounce, lowering the threshold from its prior guidance of $55 an ounce and below. The change comes as silver continues to search for support after a marked decline in recent weeks.
Silver slid from $76 an ounce in early June to roughly $56 in mid-July, a fall the bank links to rising tensions in the Middle East and higher oil prices. Those developments, UBS strategist Dominic Schnider said in a note, "have intensified concerns about higher interest rates and kept precious metals—including silver—under pressure."
On the revised buy range, Schnider wrote: "We initially pointed to $55/oz and below as levels where buying the dip looked attractive, but now lower this range to $48-50/oz while reiterating that such prices are likely to be short-lived." UBS said the narrower band reflects "that investment demand has been more lackluster than initially expected."
Investment demand and holdings
Holdings in silver exchange-traded funds have fallen substantially this year, dropping by more than 38 million ounces since the start of January to about 784 million ounces by mid-July. UBS noted some tentative signs of stabilization, with ETF holdings increasing by 1.86 million troy ounces this month, an uptick the bank interprets as investors taking advantage of the recent pullback. Futures positions, UBS added, have been broadly stable over the period.
Near-term headwinds
Schnider highlighted several pressures likely to limit immediate upside for silver: ongoing Middle East tensions, higher opportunity costs associated with elevated rates, and a firm U.S. dollar. He also pointed to an expected hawkish posture from the Federal Reserve in the short run, and stated he does not expect rate cuts until December 2026 or the first quarter of 2027.
As Schnider put it, "Silver faces a top-down backdrop that offers investors little impetus to increase long positions."
UBS forecasts
Despite the cautious near-term read, UBS anticipates the weakness will prove temporary. The bank projects silver to reach $65 an ounce by September, $70 by December, and $75 by March and June 2027. UBS also flagged the gold-silver ratio, currently just above 70x, as making silver relatively more appealing, while noting it is not yet at levels the bank would deem cheap. UBS said a move above 80x would signal greater relative attractiveness for silver.
Implications for markets
The combination of subdued ETF flows, a resilient dollar and persistent geopolitical uncertainty has weighed on investor appetite for long positions in silver. UBS's lower dip-buying range and its forecast trajectory reflect both the present softness in investment demand and the bank's expectation that macro conditions will eventually support higher prices.
While UBS reduced the buy-the-dip threshold, the bank maintains that declines to the newly specified $48-50/oz band are likely to be short-lived, and its price path points to a gradual recovery through the end of 2024 and into 2027.