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Investing.com -- UBS said it expects silver prices to climb as high as $40 per ounce in the coming months, driven by investor appetite for U.S. dollar alternatives, continued ETF inflows, and a weaker greenback.

UBS raised its near-term silver price forecast to $38/oz and said it could reach up to $40/oz is possible.  

Silver is already up 26% year-to-date, outpacing expectations amid strong momentum trading and a breakout above the $34.60 technical resistance level.

The silver market is small, just 11% the size of gold, which means even modest shifts in allocations by retail or institutional investors can move prices meaningfully.

ETF holdings have risen to around 751 million ounces, including 35.6 million ounces of inflows so far this year, the highest since 2023.

Futures market positioning remains net long by roughly 304 million ounces, up by 103 million ounces since late 2024.

UBS said macroeconomic tailwinds such as anticipated U.S. interest rate cuts and softening dollar strength could keep the precious metal in favor, even if industrial demand remains steady.

The firm downplayed the need for reserve manager or industrial buying, citing structural tightness in the silver market and strong interest from private investors.

Global silver demand is expected to hit 1.2 billion ounces this year, while supply is seen rising just 3% to 1.05 billion ounces, resulting in a fifth consecutive market deficit of around 149 million ounces, according to Silver Institute projections.

UBS also sees potential for the gold-silver ratio to fall below 90x, further supporting silver’s relative appeal.

While staying long silver remains the bank’s core recommendation, it also favors strategies that monetize downside risk, such as selling puts, citing attractive option volatility and a bullish price outlook.

This content was originally published on http://Investing.com