UBS Forecasts Silver to Reach $80 by Late 2027, Citing AI Demand and Supply Deficit

Silver prices face short-term volatility amid restrictive central bank policies but are poised to reach $80.00 per ounce by the end of 2027, according to a new research report from UBS Global Wealth Management. The bank cites a long-term structural supply deficit and expanding industrial demand, particularly from artificial intelligence infrastructure, as key drivers for its bullish long-term outlook.

Price Trajectory and Market Dynamics

In the report from its Chief Investment Office, strategist Giovanni Staunovo outlined a projected path for the precious metal. Starting from a spot price of $55.90 per ounce on October 22, 2024, UBS forecasts silver will rise to $70.00 by December 2026, reach $75.00 by mid-2027, and hit the $80.00 target by September 2027.

Staunovo noted that silver continues to behave as a "high-beta version of gold," meaning it experiences the same macroeconomic tailwinds and headwinds but with greater price swings. The report cautions that shifts in real interest rates, U.S. dollar strength, and monetary policy will continue to cause significant price fluctuations in the near term.

Industrial Demand Divergence

A clear divergence is emerging in silver's industrial end markets. High prices have accelerated the use of alternative materials and reduced silver content, especially in the solar photovoltaic sector. Citing this trend, the Silver Institute forecasts an approximate 2% contraction in total industrial fabrication demand for 2026.

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However, UBS argues that this decline will be effectively offset by long-term structural growth in other areas. Key demand drivers include:

• Expansion of data centers and AI hardware
• Investment in electrical grids
• Increased use in automotive electronics

Persistent Supply Shortfall

On the supply side, the market's response to higher prices remains constrained. While an increase in secondary recycling has been observed, primary mine production growth is rigid. A significant portion of silver is extracted as a byproduct of lead, zinc, copper, and gold mining, which limits the ability of producers to quickly ramp up output in response to price signals.

As a result, UBS expects the global silver market to record its sixth consecutive annual supply deficit in 2026. Given this backdrop, the bank advises investors against chasing rallies, suggesting instead a selective strategy of using price pullbacks, often triggered by interest rate expectations, to build exposure. Key downside risks include central banks maintaining higher interest rates for longer than anticipated, a sharp global economic slowdown, or an acceleration in industrial substitution.