UBS has updated its outlook for silver prices, forecasting further growth due to robust industrial demand and potential short supply in the market.
The financial services firm increased its forecast for silver by $4 an ounce on various future dates, predicting the metal will reach $34 an ounce by the end of September, $36 an ounce by the end of 2024 , and will maintain this level until the end of March 2025. .
Additionally, UBS introduced a new forecast for the end of June 2025, setting the target at $38 per ounce.
At the time of writing, the contracts (July 2024 contracts) are trading at $31.72.
Silver's recent performance has been very strong, particularly in May when it outperformed gold. This caused the gold/silver ratio to fall to its lowest level since December 2022.
Despite a recent pullback in prices driven by strong U.S. economic data and a hawkish tone from the Federal Reserve, UBS expects silver's outperformance to persist, projecting the ratio to narrow further to around 70 by 2025.
“So why are we raising our price forecasts? According to the Silver Institute, total industrial demand is expected to increase 9% to 711 million ounces, driven by demand from the photovoltaic sector, which is expected to grow 20% annually. y at 232 million ounces,” the analysts said.
On the supply side, challenges are expected, with mining production likely to fall 0.8% to 823.5 million ounces due to temporary mine closures in Peru.
UBS is forecasting a significant shortfall in the silver market, estimating an undersupply of 215.3 million ounces for the year, equivalent to 17% of annual global demand. This deficit should contribute to the appreciation of the price of the metal.