Silver prices were put under pressure by the strength of the US dollar and the reduction of bullish bets by speculative traders in the futures market.
Speculative accounts currently hold bullish bets equivalent to nearly 260 million ounces of silver, which is considered high compared to historical levels.
If the US dollar continues to be robust and bullish bets continue to decline, silver prices could fall further to around $27.5 per ounce or even as low as $26.1 per ounce in the near term, according to analyst analysis. UBS strategists. Given recent silver price fluctuations of more than 30%, such declines are possible.
“Most importantly, we expect a rapid recovery in silver prices from any downward movement within the next 6 to 12 months,” UBS strategists said in their analysis.
UBS strategists expect strong industrial demand for silver, especially from the solar sector. They also expect a slight reduction in silver mine production in 2024, marking the second year of decline.
These two elements, as already highlighted in their report, should provide a cushion against significant price declines, the strategists note.
For silver prices to rise, US interest rates and the US dollar need to decline in the second half of the year. UBS’s main expectation is that the Federal Reserve will lower interest rates twice this year, starting in September, which should strengthen the forecast for further rate cuts in 2025.
“This will likely lead to a positive shift in positions in Exchange Traded Funds (ETFs), which are already showing signs of stability,” UBS strategists said.
“For investors who are not as bullish on silver, we suggest considering selling bearish positions in silver as low as $26.1 per ounce for a three-month period.”
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