By Dave Taylor
Published:
The silver price in US Dollars has surged to fresh record highs, with XAG/USD trading around $109 per ounce, as momentum-driven buying and a weaker US dollar continue to propel the market higher.
UBS says the move above $100 reflects a powerful mix of investor demand for precious metals and tight physical conditions, particularly in Asia.
Chinese silver prices are trading at a clear premium to London, a signal that near-term upside pressure remains in place despite already elevated levels.
That said, UBS is increasingly cautious about chasing the rally.
While momentum could yet carry prices higher in the short run, the bank argues that current levels are likely to start eroding industrial demand, which still accounts for more than half of global silver consumption.
UBS draws parallels with past speculative episodes, noting that while silver could theoretically overshoot to extreme levels in a momentum-driven surge, history suggests such moves tend to reverse sharply once sentiment turns.
The bank highlights that silver’s late-1970s boom was followed by losses of almost 70% within a year and more than 80% over two years, a reminder that rapid upside can be followed by equally violent corrections.
Fundamentals are already showing signs of strain.
High prices are beginning to weigh on demand from solar manufacturing, jewellery and silverware, while ETF holdings have stopped rising and speculative futures positioning has been easing since late 2025.
At the same time, UBS notes that physical demand outside the US remains robust, with premiums in China and Europe pointing to ongoing regional tightness even as flows into Europe help ease supply constraints.
Against this backdrop, UBS has raised its long-term silver forecast to $85 per ounce, still well below current spot levels, while lifting its short-term target to $105 to reflect continued momentum.
Rather than adding outright long exposure, UBS prefers strategies that take advantage of extreme option volatility, which is hovering around 60%, arguing that selling downside risk below $75 per ounce can generate yield for investors with a high tolerance for risk.
The bank concludes that silver remains in overdrive for now, but warns that the balance of risks is becoming increasingly asymmetric as prices move further above levels justified by underlying demand.
