Silver prices have experienced severe volatility, with a sharp rebound following a single-day plunge. In a 'meme-like' market where monthly volatility has exceeded 100%, investment banks have issued warnings about short-term risks. However, the structural logic supporting a long-term bull market remains robust. Is the high target of $134 within reach?
The recent dizzying plunge in silver prices and the erratic trading this week have led investors to question: where is the bottom for silver, and when will it appear?
This white metal's price had reached an all-time high earlier this year but plummeted nearly 30% last Friday. Since then, silver has struggled to stabilize, despite rebounds on Tuesday and Wednesday, only to crash again by 19% on Thursday.
Strategists at UBS Group noted that the recent plunge seems to be driven more by widespread risk aversion rather than a fundamental collapse, but they warned that extreme volatility poses significant risks for short-term positions. In a report released Thursday evening, the bank stated: 'With silver's one-month volatility now exceeding 100%, sharp price fluctuations may occur in the short term.' UBS added that without sustained investment demand, silver might struggle to remain above $85 per ounce.
According to data from LSEG, silver has already experienced 11 instances of sharp fluctuations with gains or losses of 5% or more since the beginning of the year. UBS strategists remarked: 'Considering these factors and the current extreme volatility, we believe long-term exposure to silver at current levels is not attractive.'
However, UBS remains confident in the long-term fundamentals. The bank believes that declining nominal and real interest rates, global debt issues, a weakening dollar, and expectations for a recovery in global economic growth by 2026 will drive prices higher. The bank continues to forecast a supply deficit of nearly 300 million ounces this year, with investment demand expected to exceed 400 million ounces, but also warns that elevated prices may dampen industrial demand.
The sharp rise in option prices has created opportunities for investors to profit by establishing price floors rather than betting on further increases. With single-month volatility nearing 80%, UBS noted that strategies benefiting from silver maintaining above $65 per ounce are more appealing in the short term. This essentially reflects the view that while prices may remain volatile, they are unlikely to fall below this level in the near term.
Nicky Shiels, Head of Research at MKS PAMP, stated that silver's recent performance bears little resemblance to past bull markets driven by physical supply constraints. Shiels remarked: 'Given silver's extraordinary volatility, it has indeed been labeled a 'meme commodity.' She added that although silver is not cheap in absolute terms, the expansion of retail channels has amplified speculative capital flows. She expects silver to digest the excess pressure from previous rallies over the coming weeks rather than rebound immediately, with prices potentially dropping to $60 per ounce.
Vasu Menon of OCBC Bank believes that while short-term sentiment has been severely impacted, the structural bullish case for silver remains intact for investors who can endure volatility. As Managing Director of Investment Strategy, Menon noted that silver’s dual nature makes it often appear vulnerable amid intense risk-off sentiment. Menon stated: 'Silver can be viewed as a hybrid asset, exhibiting characteristics of precious metals, industrial metals, and speculative elements. When there are substantial retail capital flows, it may resemble a meme asset, but it should still be remembered that it possesses fundamental drivers.'
Menon set a long-term price target for silver at $134 per ounce by March 2027. Currently, this white metal is widely used in various industrial and technological applications, including solar energy, catalysts, and electronics.
Editor/Jayden
