The latest UBS report indicates that while gold prices have repeatedly hit new highs, silver prices have yet to break the $30 per ounce mark. However, with rising industrial demand and a narrowing gold-silver ratio, silver prices are expected to make a breakthrough in the coming years. UBS predicts that by 2025, the price of silver will reach $36-38, and recommends investors include silver in their long-term portfolios to enhance the diversity of safe-haven assets during market downturns.
The report analyzes that although gold remains the primary safe-haven asset, silver prices are highly correlated with gold trends. Additionally, silver benefits from its unique properties for industrial applications, providing it with upward potential in situations of global economic growth and tight supply. Industrial demand for silver occupies a significant proportion, correlating closely with the development of new energy, 5G, and automotive sectors. UBS believes that the growth in global industrial demand for silver will continue to drive up silver prices, becoming a major driving force for its bull market.
Data shows that recently the silver-to-gold price ratio has risen from a low of 79 to 84, and the relative performance of silver compared to gold may continue to be superior. UBS predicts that within the next 12 months, the gold-silver ratio will fall back to the mid-70s, a change that usually indicates that silver prices are undervalued relative to gold, possibly suggesting significant upside potential for silver. Historical data shows that when the gold-silver ratio reaches the range of 80 to 100, it is often a signal of a significant rise in silver, indicating that current silver prices are undervalued.
In addition to the growth in industrial demand, the shortage of supply in the silver market continues to intensify. The report notes that the physical silver market's shortage situation has not yet been alleviated, and the supply gap may further widen in 2024, which will support silver prices. Furthermore, technical charts show that silver prices are forming a distinct "cup and handle" pattern, considered a technical signal for long-term rises, possibly indicating a significant increase in silver over the coming years.
UBS recommends that investors hold silver in a diversified investment portfolio for the long term to achieve both hedging and appreciation objectives.
