Silver Deficit Hits 800M oz: UBS Sees $42 Price Target

UBS: “Silver Has Room to Run a Bit Higher”

“Silver has been one of the best-performing metals this year, surging 34%.” — UBS

Silver has been one of the strongest assets in 2025, rising 34% year-to-date and nearly 8% in July alone. Renewed investment flows, softening dollar conditions, and tariff-induced buying pressures have pushed prices higher, with momentum now prompting institutional upgrades.

“We reiterate our preference to stay long silver and view price pullbacks as buying opportunities.” — UBS

In a report authored by Dominic Schnider and Wayne Gordon of UBS, the bank raised its silver price forecasts from USD 38 to USD 42 per ounce across all tenors through mid-2026. The revision reflects a constructive stance on investment and industrial demand, as well as a view that pullbacks toward USD 37.25 represent renewed buying opportunities. UBS continues to recommend put-selling strategies to enhance yield for directional buyers.

UBS is well positioned to observe buy side flows more than most other major institutions. Historically, the firm has erred on the conservative side when revising precious metals forecasts. Since 2023, their calls have consistently trailed price action modestly but have yet to be wrong. This consistency underlines the significance of their current upgrade. Moreover, UBS’s move follows prior guidance from GoldFix suggesting such an upward revision was imminent. That observation is now vindicated.

UBS’s Recent Track Record

This is not the first time UBS has taken a timely and structured approach to silver. It was the bank that first recommended aggressive clients accumulate silver at USD 29 in 2024, explicitly advising put sales if the price dipped to USD 28. Prior to that in early December 2023, UBS told its clients that gold was overbought following the December 4th price spike; Yet also emphasized it was a long-term buy and not to be sold out yet. That consistency is now echoed in their silver positioning, with a firm preference to stay long.

Investment Flow Drives the Price Narrative

“Total known silver ETF holdings have climbed to approximately 786 million ounces.” — UBS

Investor participation continues to be a key input for UBS’s revised view. Futures markets now reflect net long positions of 297 million ounces, up nearly 100 million ounces since year-end 2024. ETF holdings stand at 786 million ounces, buoyed by 70 million ounces in year-to-date inflows. Demand is bifurcated regionally. India remains robust with a 7% increase in H1 2025 retail buying. Europe has seen moderate pickup. The U.S. has faced retail headwinds, with demand estimated down 30% year-to-date.

Demand Rebounds, Supply Steady

“We expect mine supply to rise marginally by 1.9% y/y to 835 million ounces.” — UBS

The macro rationale for holding silver remains intact. The weakening U.S. dollar, easing global growth concerns, and strength in silver’s industrial applications—particularly in solar, autos, and electronics—create a multi-faceted bull case. UBS notes that downside risks to industrial demand have receded, opening space for investor accumulation without macro overhang.

The demand side is matched by a relatively stable supply backdrop. Global mine production is expected to increase just 1.9% to 835 million ounces, mainly from expansions in North America and Africa. The Silver Institute expects global demand to hit 1.15 billion ounces this year. UBS considers that forecast conservative and notes that any investor-driven upside surprise would stress already tight conditions. Tariff risk from the U.S. remains a wildcard, particularly if it interferes with industrial throughput.

Structural Deficit

“Since 2021, silver has faced a structural deficit, resulting in a cumulative shortfall estimated at about 796 million ounces through 2025.” — UBS

Importantly, silver remains in structural deficit. UBS forecasts a shortfall of 118 million ounces in 2025, bringing the cumulative deficit since 2021 to nearly 800 million ounces. This imbalance supports a positive price outlook and explains the firm’s revised tenor forecasts. Should these deficits persist into 2026 without matching mine response, pricing pressure could accelerate.

USD Weakness Anchors the Bull Case

From a tactical lens, UBS centers its view on further U.S. dollar weakness. Silver’s historical inverse correlation with the dollar remains strong. UBS now sees the gold-silver ratio falling to 85 or below if growth accelerates into year-end. Given silver’s tendency to overshoot in such conditions, the possibility of a lower ratio remains on the table.

Put strategies continue to play a central role in UBS’s suggested positioning. Pullbacks to the USD 37.25 level are seen as attractive reentry points. Option volatility near 25% is described as benign by historical standards, further strengthening the risk-reward calculus for downside selling.

Silver Joins the Institutional Rotation

We note a behavioral shift across the institutional space. Goldman Sachs, long skeptical and dismissive of silver as a strategic asset, has turned markedly more constructive in recent weeks. This tonal shift is uncharacteristic and may signal a broader reassessment of silver’s role as a financial and industrial asset.

A repeating pattern is now emerging. Institutional voices are aligning one by one behind silver, just as they did when gold began its upward repricing cycle. UBS’s upgraded outlook, coupled with rising ETF flows, narrowing deficits, and a softening U.S. dollar, fits squarely within that progression.

To put a finer point on the bank’s Gold/Silver spread comment, If the spread stays under 90 on a monthly closing basis, 79 should not be a problem in coming months.

That would put Silver at $43.50 assuming Gold hits $3500. That would also put the bank in the money on this call.

Bottom Line: This Report is Steak.

We’d note that there is pronounced unwinding of the Gold Silver ratio among institutions who were long Gold and short silver for two years on the back of CB gold demand. Given the continued rate cuts and pick up in industrial economies, Silver is now the better play.

The reasons for Silver’s rise as cited by UBS are not as important as the fact they are raising their target and telling clients to sell puts again almost $10 higher than where they first suggested the idea. Forget the sizzle. This is steak. As the song goes: See you in September.