Silver Prices Poised for 20% Rally in Next 12 Months, Says UBS Analysts
Silver prices are set to soar by nearly 20% over the next year, driven by a mix of favorable macroeconomic factors, according to analysts at UBS. The combination of monetary easing, industrial demand recovery, and growing investor interest through ETFs are key factors that could push silver prices higher. Currently trading around $32/oz, silver is supported by global monetary policy easing and a weaker US dollar.
The recent decision by the Federal Reserve to cut rates has boosted market confidence that real rates will continue to decline. This lower real rate environment is expected to fuel economic growth and increase industrial demand for silver, which is essential in sectors like electronics, renewable energy, and medical technology. Additionally, the weakening US dollar typically supports higher silver prices.
UBS forecasts that silver could reach $36-38/oz by next year as central banks' influence and the global manufacturing recovery drive demand for the precious metal. China's stimulus measures aimed at reviving its economy are also expected to boost demand for silver, as China is one of the largest consumers of silver for industrial use.
While UBS expects silver to break out of its current trading range and embark on a sustained rally, they caution that risks such as unexpectedly strong economic data and unsuccessful stimulus measures in China could challenge this bullish outlook. Speculative positions in silver futures also remain elevated, posing a risk to silver's short-term prospects.
Overall, the bullish outlook for silver is supported by a combination of factors including rate cuts, monetary easing, rising industrial demand, and Chinese stimulus measures. Investors looking to capitalize on this trend may consider selling the downside for a yield pickup as an alternative way to gain exposure to silver.