Silver hit an all-time high of $121.64 on January 29. By May 14, it was trading at $84, having briefly cleared $87 the day before on US-China tariff optimism before April CPI data pulled it back. On the same day it fell below $85, UBS published a note that explains why the easy part of the silver trade may already be over.
The revision is not a minor trim. It is an 80% cut to the bank’s supply deficit estimate, and it changes the fundamental argument for holding silver through the rest of 2026.
What UBS changed on silver and why the deficit revision matters
UBS analysts Wayne Gordon and Dominic Schnider published their revised silver outlook on May 14, cutting the bank’s estimate of the 2026 global supply deficit from approximately 300 million ounces to 60 to 70 million ounces, according to Seeking Alpha. That is not a marginal revision. It is an 80% reduction in the scarcity story that has supported silver’s rally for the past several years.
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Price targets were cut across the board alongside the deficit revision. The end-second-quarter 2026 target was lowered from $100 to $85, the end-September target from $95 to $85, the year-end target from $85 to $80, and the March 2027 forecast from $85 to $75, according to NAI 500. The bank’s base case is now that silver will “trade broadly sideways” for the remainder of the year.
UBS says three demand headwinds are shrinking the silver deficit
The deficit revision is driven by three converging forces on the demand side, each of which has been amplified by the same factor: silver’s price surge earlier in the year.
The first is photovoltaic demand. Solar cells have been the largest source of incremental silver consumption in recent years, but rising silver paste costs per watt are accelerating manufacturers’ shift toward lower-silver cell technologies. “For 2026, we expect weaker demand from photovoltaics due to elevated prices,” Gordon and Schnider wrote in the note, according to deVere Group. The second is silverware and jewelry demand, where consumers have pulled back as prices remain elevated. The third is investment demand: total known ETF holdings have dropped by nearly 70 million ounces to around 794 million ounces, and net speculative futures positions have pulled back to just above 100 million ounces, according to Investing.com. Together, UBS estimates these demand channels will reduce consumption by approximately 50 million ounces in 2026.
On the supply side, the picture is modestly firmer. Mine output is expected to reach approximately 850 million ounces in 2026, providing additional pressure against the deficit. That combination of weaker demand and stronger supply is the core of the revised view.
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What gold’s trajectory means for silver investors
UBS stopped short of a fully bearish call. The reason is gold. The bank still expects gold prices to trend higher, and it views that as “an important anchor for silver.” The gold-silver ratio, which recently sat in the 84 to 85 range, is expected to drift toward 75 to 80 over time, according to NAI 500. That implies silver may still have some room to close the gap with gold, but on a narrower and slower path than bulls had anticipated.
The practical trading recommendation from UBS reflects that ambivalence. Rather than recommending outright long positions, the bank favors selling volatility to harvest carry over the next three months. Even though implied volatility has fallen significantly from its peak earlier this year, when one-month realized volatility briefly approached 150% in February, it remains elevated relative to historical norms. That elevated volatility creates a premium that UBS believes can be captured without taking a directional view on price, Seeking Alpha confirmed.
Key figures from UBS’s May 14 silver note:
- 2026 supply deficit revised: 60 to 70 million ounces, down from prior estimate of approximately 300 million ounces, an 80% reduction, according to Investing.com.
- Price target cuts: end-Q2 2026 from $100 to $85; end-September from $95 to $85; year-end from $85 to $80; March 2027 from $85 to $75, according to NAI 500.
- Demand reduction estimate: approximately 50 million ounces across photovoltaics, jewelry, and silverware, Investing.com confirmed.
- ETF holdings: down 70 million ounces to approximately 794 million ounces; net speculative futures positions just above 100 million ounces, Seeking Alpha noted.
- Mine supply: approximately 850 million ounces expected in 2026; modestly firmer backdrop, according to deVere Group.
- Silver all-time high: $121.64 on January 29, 2026; spot price at approximately $84 on May 14, according to GoldSilver.com.
- Other bank forecasts: BofA 2026 average $85.93, JPMorgan full-year average $81, Citigroup H2 target $110, according to GoldSilver.com.
What the UBS call means for silver investors from here
The most important implication of UBS’s note is not the new price targets. It is the shift in the underlying thesis. For three years, the bullish case for silver rested heavily on a structural supply deficit that was widening year after year. That deficit is now expected to narrow dramatically. If the primary argument for holding silver was scarcity, that argument has weakened significantly in the near term.
The divergence between UBS and other banks is wide enough to give investors pause. Citigroup still sees silver reaching $110 in the second half of 2026. Bank of America projects a 2026 average of $85.93. JPMorgan’s full-year average sits at $81. UBS’s year-end target is now $80. The spread between the most bullish and most cautious calls on silver right now is more than $30, which reflects genuine uncertainty about whether the demand destruction triggered by this year’s price surge is temporary or structural.
UBS’s answer is that it is real enough to materially change the near-term outlook, even if gold provides a floor and the long-term industrial case for silver remains intact. For investors who bought the scarcity story, the bank is essentially saying: the story has not ended, but the most compelling chapter may already be behind you.
Related: Analysts have a message for investors on the silver price drop
