UBS updated its outlook for silver prices, projecting further growth due to robust industrial demand and a potential undersupply in the market.
The financial services firm increased its silver forecasts by $4 per ounce across various future dates, anticipating the metal to reach $34 per ounce by the end of September, $36 per ounce by the end of 2024, and maintain that level through the end of March 2025.
Moreover, UBS introduced a new forecast for the end of June 2025, setting the target at $38 per ounce.
At the time of writing, silver futures (July 2024 contracts) are trading at $31.72.
Silver's recent performance has been very strong, especially in May when it outperformed gold. This has caused the gold-to-silver ratio to drop to its lowest point since December 2022.
Despite a recent pullback in prices due to 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 rise by 9% to 711 mn oz, driven by demand from the photovoltaic sector, which is estimated to rise by 20% y/y to 232 mn oz," analysts said.
On the supply side, challenges are anticipated, with mine production likely to fall by 0.8% to 823.5 million ounces due to temporary mine shutdowns in Peru.
UBS predicts a substantial shortfall in the silver market, estimating an undersupply of 215.3 million ounces for the year, which equates to 17% of the annual global demand. This deficit is expected to contribute to the metal's price appreciation.