UBS Expects Silver to Benefit From Gold’s Supportive Backdrop

UBS expects silver prices to benefit from the supportive backdrop for gold, even as the precious metal faces short-term pressure from a more hawkish U.S. Federal Reserve.

In a note published on September 21, UBS strategist Dominic Schnider said silver continues to track gold closely, with the correlation between the two metals near multi-year highs. UBS sees silver as increasingly behaving like a higher-beta version of gold, meaning it can move more sharply in the same direction as the yellow metal.

The bank forecasts silver at $70 per ounce by December 2026, rising to $75 by March and June 2027, and $80 by September 2027. The forecasts compare with a spot price of around $66.50 per ounce on September 18.

For investors, the outlook is significant because silver sits between two markets: it is both a precious metal and an industrial commodity. That combination gives it additional sources of demand, but also exposes it to risks that do not affect gold in the same way.

Why UBS Is Positive on Silver

UBS's latest view is closely connected to its outlook for gold.

Gold has benefited from concerns over government finances, geopolitical uncertainty and longer-term questions about the purchasing power of the U.S. dollar. UBS believes these forces can also support silver because investors often allocate to both metals when seeking exposure to precious metals.

The relationship between the two metals has strengthened considerably.

When gold rises because investors are seeking protection against macroeconomic or geopolitical uncertainty, silver can eventually attract additional investment demand. Because the silver market is smaller and more volatile, its percentage moves can be larger.

That is why UBS describes silver as a higher-beta version of gold rather than treating it purely as an industrial metal.

UBS Silver Price Forecast

UBS's latest projections point to a gradual increase rather than an immediate surge:

The forecasts are based on UBS's assessment of investment demand, industrial consumption, gold prices and the broader macroeconomic environment.

The progression also illustrates an important point: UBS is not assuming that silver will move higher in a straight line. Short-term volatility remains a central feature of the market.

Industrial Demand Gives Silver an Additional Support

Unlike gold, silver has substantial industrial applications.

Silver is used in electronics, photovoltaic systems, electric vehicles, power infrastructure and other industrial applications. UBS expects growth in data centres, AI infrastructure, electricity-grid investment and electric vehicles to help offset some weakness caused by manufacturers attempting to reduce silver usage in solar applications.

This process is sometimes called thrifting. It means manufacturers attempt to use less of a costly material while maintaining the same functionality.

Solar manufacturers, for example, have an incentive to reduce the amount of silver used in photovoltaic cells when prices become elevated. UBS acknowledges this pressure but believes broader industrial demand can help compensate.

This creates a different demand profile from gold. Gold is primarily driven by investment, jewellery and central-bank demand, whereas silver has a significant connection to industrial production.

Silver Supply Could Remain Tight

Supply is another part of UBS's constructive view.

A large proportion of global silver production comes as a byproduct of mining other metals, including lead, zinc, copper and gold. This means higher silver prices do not necessarily result in a rapid increase in silver mine production.

For example, a mining company producing copper may recover silver as a secondary output. It cannot simply double silver production whenever silver prices rise if its primary mining economics do not justify expanding the underlying operation.

That limits the market's ability to respond quickly to stronger demand.

UBS had previously expected the silver-market deficit to narrow substantially in 2026, but still viewed higher gold prices as an important stabilising force for silver.

Gold-Silver Ratio Remains Important

Another indicator investors can watch is the gold-silver ratio.

It measures how many ounces of silver are required to buy one ounce of gold. A declining ratio generally means silver is outperforming gold, while a rising ratio means gold is outperforming silver.

UBS sees limited scope for the ratio to sustain a move above 70 times, suggesting that silver could continue to gain relative support if gold remains strong.

The ratio is not a standalone trading signal, but it provides useful context when comparing the two metals.

If gold rises while silver remains unchanged, the ratio increases. If silver catches up or outperforms gold, the ratio falls.

Federal Reserve Policy Is a Near-Term Risk

The bullish silver outlook does not mean the path will be smooth.

UBS identified a more hawkish Federal Reserve and the possibility of additional interest-rate increases as near-term headwinds. Higher interest rates can make non-yielding assets such as precious metals less attractive relative to interest-bearing investments.

Gold itself faced pressure on September 21 as expectations for further Fed tightening supported the U.S. dollar. Reuters reported spot gold at around $4,361.96 per ounce, down 0.3%, while traders were pricing an 88% probability of another Fed rate hike in December. Silver nevertheless gained about 0.4% that day.

This divergence is worth watching.

If monetary policy remains restrictive for longer, both metals could experience periods of weakness. But if gold remains resilient despite higher rates, silver could potentially benefit from the continued precious-metals investment theme.

What Could Challenge UBS's Silver Outlook?

UBS has identified several risks to its constructive medium-term view.

The first is more aggressive monetary tightening. Higher real interest rates and a stronger dollar could reduce investment demand for precious metals.

The second is a sharp deterioration in global economic growth. While silver can benefit from safe-haven demand, a severe economic slowdown can hurt its industrial consumption.

The third is a larger-than-expected decline in industrial demand. High silver prices are already encouraging substitution and thrifting in some solar applications. If industrial demand weakens more significantly, it could offset some of the support from investment demand.

Investors therefore need to track both sides of the silver market rather than focusing only on its relationship with gold.

What the UBS View Means for Indian Silver Investors

For Indian investors, global silver prices are only one part of the equation.

Domestic silver prices are influenced by the international silver price, the USD/INR exchange rate, import-related costs and local market conditions.

A weaker rupee can increase the rupee value of internationally priced silver, while a stronger rupee can reduce some of the impact of a rise in the dollar-denominated price.

Indian investors should also distinguish between physical silver, silver ETFs and other exchange-traded products. Each has different costs, liquidity characteristics and tracking considerations.

The international outlook from UBS can provide context, but it does not translate directly into a guaranteed domestic price target.

What Investors Should Watch Next

Several indicators could determine whether UBS's silver forecast remains on track:

• Gold prices: Continued strength in gold would support UBS's core thesis.

• Federal Reserve policy: Additional rate hikes could create short-term pressure.

• U.S. dollar and real yields: A stronger dollar and higher real yields can weigh on precious metals.

• Industrial demand: Data-centre, AI, EV, grid and solar demand will remain important.

• Mine supply: Because much silver is produced as a byproduct, supply may respond slowly to higher prices.

• Gold-silver ratio: A sustained move below 70 could indicate stronger relative performance by silver.

• Investment flows: ETF and institutional demand can amplify price movements.

Silver Outlook

UBS expects silver to benefit from the same structural forces supporting gold while also receiving additional support from industrial demand.

Its current forecast calls for silver to reach $70 per ounce by December 2026 and $80 by September 2027.

The key question is whether investment demand and industrial consumption can offset the pressures created by higher interest rates and elevated silver prices.

For investors, the UBS view reinforces the importance of watching silver alongside gold rather than treating the two metals as completely separate markets. Gold remains the primary macro and reserve-asset driver, while silver adds industrial exposure and generally higher volatility.

The combination can create opportunities, but it also means silver's downside can be sharper when economic growth, monetary policy or investor sentiment turns unfavourable.

Follow the blog for more updates on gold, silver, commodities, global markets and investment trends.

This article is for informational and educational purposes only and should not be considered investment advice.