Investing.com — UBS Global Research maintained its positive stance despite the recent sharp price decline in a July 26 note, attributing the volatility to a combination of factors including risk-taking in broader financial markets and profit-taking. among speculative investors.
“The recent price decline, in our view, should be used to execute volatility selling strategies,” the analysts said. UBS expects further negative impacts to be limited, with the metal likely to recover as macroeconomic conditions improve and risk appetite returns.
UBS points out that the recent decline in silver prices has pushed the gold-silver ratio to the 90-91 level, a historically oversold situation. The bank estimates that silver could fall to around $26 an ounce before support is found. However, UBS adds that such a decline would be a temporary setback and present an attractive buying opportunity.
To take advantage of the increased volatility, analysts recommend considering volatility selling strategies. This involves selling options to generate income while maintaining a bullish position on silver over the long term. Analysts suggest selling downside protection against silver prices starting at USD 26 per ounce over the next three months.
UBS’s bullish outlook for silver is supported by expectations of strong US earnings and resilient macroeconomic data. The brokerage adds that these factors will ultimately lead to a recovery in risky assets, including silver.
Additionally, UBS expects continued inflows into silver exchange-traded funds (ETFs), which could provide additional support for prices.
