Silver prices were seen higher in the coming months, says UBS By Investing.com

Investing.com — Prices are poised for further gains in the coming months, driven by a combination of favorable macroeconomic factors and demand fundamentals, analysts at UBS said in a note on Monday.

A weaker US dollar, improved sentiment in financial markets and record gold prices have all contributed to a modest recent rebound in silver prices.

UBS analysts suggest that long-term investors should consider increasing exposure to silver, with a target price range of $36-38 per ounce.

The recent weakening of the US dollar and the shift to a more risk-on environment among investors provided a favorable backdrop for silver.

While much of the market’s focus has been on US macroeconomic developments and the potential for interest rate cuts, UBS analysts believe silver offers more than just a play on US economic news.

Despite recent weak production data from developed economies, UBS remains bullish on industrial demand for silver.

“In our base case, industrial applications demand is expected to grow further by 50 million ounces this year, or close to 10% y/y, driven by secular demand drivers (such as the energy transition)” , analysts said.

This growth is expected to be driven by long-term secular trends, including the global energy transition, which is likely to require increasing amounts of silver for applications such as solar panels and electrical components.

Another positive factor for silver prices is renewed demand from China. UBS notes that China has returned to a net importer of silver, with net imports reaching 5.0 million ounces in July, up from 3.2 million ounces in June.

The brokerage expects that China will continue to report positive net imports in the next August trade data.

This renewed appetite for silver in China is partly driven by falling yields in the country and expectations of further (CNY) weakness, which is likely to keep onshore silver prices high.

As a result, silver imports into China are expected to remain strong, providing further support to global silver prices.

UBS analysts also point to the potential for increased demand for silver exchange-traded funds (ETFs) as US economic outperformance or “exceptionalism” fades.

In addition, a rebound in manufacturing sentiment, which UBS anticipates in the coming months, could further boost silver demand.

Given these factors, UBS maintains a positive outlook on silver, advising long-term investors to consider long-term exposure to the metal.

In addition, the brokerage suggests that investors may explore downside risks in selling prices to generate additional yield given the favorable demand dynamics and favorable macroeconomic context.