Will silver stage a "roller coaster" market this year? UBS warns: it may surge another 25% in the first half, but could fall back in the second half

UBS significantly raised its price forecasts for silver, platinum, and palladium, expecting a "two halves" market in 2026—strong price increases in the first half, followed by a decline as prices return to fundamentals in the second half. This forecast is based on the impact of market tensions and investor participation exceeding expectations, despite unchanged supply and demand fundamentals.

On January 13, according to news from the Wind Trading Desk, UBS stated in its latest research report that silver prices still have about 25% upside from current levels, while platinum and palladium have potential increases of 5-6%, but prices are expected to gradually decline before the end of the year.

The bank particularly emphasized that despite raising price forecasts, the path for metals like silver is not without challenges, and caution is warranted regarding the risk of pullbacks.

The report indicated that the core driving factor for this forecast adjustment is the surge in trading activity in the Chinese market. Since the second half of 2025, trading volume in Chinese silver futures has soared, and the unexpected level of investor participation is amplifying the impact of market tensions on spot prices.

UBS strategist Joni Teves stated that market participants need time to assess how supply and demand factors adapt to the new price dynamics, which may lead to increased price volatility.

At the same time, the bank reiterated its bullish view on gold, believing it will continue to rise in the first half of this year, with an expected upside of about 9% from current levels under the base case scenario.

Substantial Forecast Upgrade: "Roller Coaster" Trend Within the Year

UBS has made a substantial upward revision to its price forecasts for silver, platinum, and palladium to reflect recent price trends and consider previously underestimated factors.

The report pointed out that although the bank's expectations for fundamental supply and demand remain unchanged, the impact of market tensions and increased investor participation on spot prices is greater than expected.

The new forecast indicates that 2026 will be a year of "two halves." Specifically:

• First Half: Prices will remain strong. According to UBS's forecast, silver is expected not only to follow gold's lead but also to potentially rise another 25% from current levels. The potential increases for platinum and palladium are around 5-6%.

• Second Half: As the market reassesses price dynamics and the adaptability of supply and demand, price trends will return to fundamentals and gradually narrow before the end of the year.

From a longer-term perspective, UBS believes silver should continue to follow gold's trend, platinum should resume a gradual upward trend, while palladium is expected to recover a weak trend as the market moves towards balance and ultimately experiences a supply surplus.

The Path to Increase is Full of Bumps: Beware of Pullback Risks

UBS warns that the sustained strength at the beginning of 2026 does not mean that precious metals have completely avoided consolidation after a significant rise in the fourth quarter of 2025.

The bank remains cautious about potential near-term downside risks, especially in the second quarter, when the precious metals market is typically quieter.

The report noted that another downside risk comes from the announcement of the Section 232 investigation. If exemptions for tariffs on silver and other platinum group metals are confirmed, it may release some inventory held in the U.S., thereby alleviating some market tensions Data shows that after a deep spot premium in the fourth quarter, the one-month forward contract for silver has recently recovered.

In addition, the bank pointed out that there is also a risk that the price increase has already been priced in—last year's fourth-quarter rebound and the strength at the beginning of 2026 may have set the stage for weak price trends and significantly reduced volatility in the coming year.

However, the research report states that, considering all factors, UBS believes that the threshold for a pullback has increased, and key technical levels have been broken, with the trading range now higher and wider than previously expected.

Chinese Factors Become Key: Surge in Trading Volume Amplifies Market Impact

Precious metals such as silver, platinum, and palladium led the gains in the last few months of 2025 and maintained strength at the beginning of the new year. UBS pointed out that activity in the Chinese market is crucial for the price trends of silver, platinum, and palladium this year.

UBS stated that the sharp rebound in Chinese futures trading volume since the second half of 2025 has exceeded expectations and has become a key factor in driving up prices.

The research report noted that investors' pursuit of returns has also increased the attractiveness of alternative assets such as precious metals. UBS believes that gold has been the main beneficiary, and while this situation may continue, investment interest has also spread across the entire precious metals sector.

UBS mentioned that the channels for obtaining silver and platinum group metals through the Shanghai Futures Exchange and the Guangzhou Futures Exchange allow investors to further increase their exposure to precious metals. This convenient access channel raises the likelihood of investment interest exceeding previous expectations.

The bank specifically pointed out that data shows that China's silver futures trading volume is far higher than that of the New York Mercantile Exchange, but the silver inventory on the Shanghai Futures Exchange is less than 10% of that on the New York Mercantile Exchange and has been declining in recent years. This may reflect weak industrial demand and destocking caused by overcapacity in the solar industry.

The research report states that data from the Shanghai Futures Exchange (SHFE) shows that silver inventory has been on a downward trend since 2020, reflecting weak industrial demand and destocking caused by overcapacity in the photovoltaic industry. However, after several years of inventory decline, improvements in industrial demand and increased investment interest may trigger a replenishment cycle, thereby pushing up prices.

Gold Outlook Remains Unchanged: Upside Risks Are Rising

UBS recently reaffirmed its outlook for gold, noting that it may rise further in the first half of this year. The bank's baseline scenario indicates that there could be about a 9% increase from current levels.

The bank previously believed that the rebound to new highs by the end of the year might be more a result of the spillover effect from white metals and the thin liquidity during the holiday period. However, as 2026 unfolds, prices remain strong even after the anticipated index rebalancing sell-off The latest news highlights ongoing political uncertainty and geopolitical risks, which support the appeal of gold as a portfolio diversification tool. UBS previously pointed out that if concerns about the independence of the Federal Reserve escalate significantly, it will be a key upside risk for gold's outlook.