Silver costs have been struggling because the U.S. greenback strengthens and speculative merchants cut back web lengthy positions within the futures market.
At present, speculative accounts maintain a web lengthy place in silver of practically 260 million ounces, which is comparatively excessive by historic requirements.
UBS strategists mentioned in a report that if the U.S. greenback stays sturdy and web positions proceed to lower, silver costs might fall additional to round $27.5 per ounce and even $26.1 per ounce within the brief time period. This decline is just not uncommon contemplating silver’s latest value swings of over 30%.
“The underside line is that we do count on silver costs to rebound shortly from any pullback over the following 6-12 months,” UBS strategists mentioned in a be aware.
UBS strategists count on sturdy industrial demand for silver from the optoelectronics sector. Moreover, mine output is anticipated to contract barely once more in 2024 for the second consecutive yr.
The strategists famous that these two components beforehand highlighted within the report ought to assist forestall costs from falling.
For silver costs to rise, each U.S. rates of interest and the greenback must fall within the second half of the yr. UBS’s base case is that the Fed will reduce rates of interest twice this yr beginning in September, which ought to improve expectations for additional price cuts in 2025.
“This could in the end result in a turnaround in ETF positioning, which has proven indicators of stabilizing,” UBS strategists wrote.
“For traders who’re much less bullish on silver, we suggest promoting the draw back danger at $26.1/oz in three months.”
