Silver’s Bull Case Unravels: UBS Slashes Supply Deficit by 80% as Macro Forces Trump Physical Tightness

Silver at $67.96, 44% below high, oversold RSI 35. UBS slashes deficit 80%, analysts split $75-$110 amid monetary-industrial tug-of-war.

Silver is trading at $67.96 per ounce — 44 percent below the January all-time high of $121.78 — and the technical picture is anything but pretty. The relative strength index sits at 35, firmly in oversold territory, while the metal has slipped roughly 11 percent below its 50-day moving average. A 67 percent probability of a Federal Reserve rate hike, fueled by a blockbuster US jobs report for May, sent silver plunging nearly 6 percent in hours. Gold lost only half as much.

The selloff underscores a fundamental disconnect. Silver runs on two engines: monetary and industrial. The monetary engine stalled as the 10-year US Treasury yield climbed to 4.54 percent and the dollar strengthened, crushing demand for non-yielding assets. But the industrial engine — solar, electric vehicles, data centers — barely flinched. That paradox now defines the market, leaving analysts deeply split on where silver heads next.

The Deficit Story Gets a Rewrite

The Silver Institute and Metals Focus had warned of a sixth consecutive annual supply deficit, projecting a shortfall of 46.3 million ounces for 2026 — 15 percent larger than the prior year. Since 2021, global inventories have shed 762 million ounces. That narrative of deepening scarcity looked like a sturdy floor under prices.

Then UBS stepped in with a wrecking ball. Analysts Wayne Gordon and Dominic Schnider slashed their global supply-deficit estimate from roughly 300 million ounces to just 60–70 million — a cut of 80 percent. The reason: ETF holdings have shrunk by nearly 70 million ounces, and speculative futures positions are fading fast. UBS now pegs investment demand at 300 million ounces, down from a previous estimate of over 400 million.

The revised price targets follow suit: $85 by end of the current quarter, $80 by year-end, and $75 by March 2027.

Analyst Consensus Fractures

The gap between institutional outlooks has rarely been wider. Bank of America forecasts a 2026 average of $85.93, JPMorgan $81, while Citigroup clings to a $110 target for the second half. A Reuters poll lands near $79.50. That spread — more than $30 between the most bullish and most cautious calls — reflects a genuine uncertainty about whether the demand destruction from high prices is temporary or permanent.

The industrial side adds another layer of complexity. Solar-paste costs per watt are rising, pushing manufacturers toward cell technologies that use less silver. This substitution shift has yet to be priced into either bullish or bearish models, leaving a wildcard in the demand equation.

Geopolitical Risk Premium Vanishes

Geopolitical sparks usually kindle precious metals. Not this time. Iranian rocket attacks sent oil prices higher, but silver barely budged — down around 2 percent on the session and nearly 10 percent for the week. Year-to-date, the metal is off about 6 percent.

The reason lies in silver’s dual role. As an industrial commodity, any threat to global growth weighs on demand expectations. Higher bond yields and a firm dollar compound the pressure, making dollar-denominated silver more expensive for buyers abroad. That cocktail has overwhelmed every geopolitical impulse.

China may hold the key early next year. The country posted unusually high silver imports in the first quarter, driven by industrial and investment buying, notably from the solar sector. If those imports stay robust, it will signal that physical demand is more resilient than the price action suggests. A pullback, however, would amplify the bearish case.

For now, the market is trapped between a supply deficit that just got a lot smaller and macro headwinds that show no signs of easing. Silver is oversold technically but lacks a clear catalyst for a rebound — and the crisis premium that used to come with Middle Eastern tensions has simply evaporated.