Investing.com — UBS said in a note to clients on Wednesday that silver remains attractive compared with gold and said it views pullbacks in the metal as a way to add exposure.
“Silver is nearing its previous record high of USD 49.80/oz set on 30 June 2011,” said UBS strategists Dominic Schnider and Wayne Gordon.
The move has been “driven by broad-based strength in precious metals and rising investment demand,” with “fear of missing out” increasingly evident amid “elevated uncertainties around fiscal and political developments in the US and expectations that the USD will fall further.”
As a result, UBS continues to “prefer a long position in silver, viewing pullbacks as opportunities to add exposure.”
The bank sees “technical support at around USD 44–46/oz” and added that “selling the metal’s downside risk remains a viable strategy given our positive price outlook and the pickup in option volatility.”
The bank’s analysts expect the gold-silver ratio to “move toward 76x (from above 80x), reflecting a reassessment of investment demand strength and the sensitivity of silver prices to ETF inflows.”
UBS projects silver ETF holdings to climb to “previous highs of 1,021 million ounces, up from the current level of around 822 moz.”
“For many investors, silver remains cheap relative to gold,” UBS said, noting that while gold trades at “all-time highs in both real and nominal terms,” silver offers a “potential for relative revaluation.”
The bank remarked that the absence of central bank purchases limits silver’s safe-haven appeal, but its “industrial application demand” continues to provide support, particularly from electronics and solar panels.
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