NVDA gained a massive 197% since our AI first added it in November - is it time to sell? 🤔Read more

UBS says silver prices should rise once Fed begins cutting rates

Published 2024-06-28, 06:22 a/m
© Reuters.

Silver prices have struggled due to a strong US dollar and speculative traders reducing their net long positions in the futures market.

At the moment, speculative accounts hold net long positions of nearly 260 million ounces of silver, which is high by historical standards.

If the USD remains strong and net positions continue to be reduced, silver prices could drop further to around USD 27.5/oz or even USD 26.1/oz in the near term, UBS strategists said in a note. Considering silver's recent price volatility of over 30%, such declines are not uncommon.

“Most importantly, we do expect silver prices to rebound quickly from any pullback over the next 6–12 months,” UBS strategists said in a note.

Primarily, UBS strategists expect strong industrial demand for silver from the photovoltaic sector. Moreover, mine output is expected to contract marginally again in 2024 for the second consecutive year.

These two factors, previously highlighted in their report, should help protect against price declines, strategists noted.

For silver prices to rise, both US interest rates and the US dollar need to fall in the second half of the year. UBS's base case scenario is that the Federal Reserve will cut rates twice this year, starting in September, which should strengthen expectations for further rate cuts in 2025.

“This should finally bring a turnaround in ETF positions, which are already showing signs of stabilization,” UBS strategists wrote.

“For investors who are less bullish on silver, we recommend selling downside risks in silver from USD 26.1/oz over three months.”

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.