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Silver Rally Faces Pressure: Time for Inverse ETFs?
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Key Takeaways
UBS and HSBC warn silver prices remain vulnerable as high prices hurt industrial demand.
Silver lacks central bank support and remains more volatile than gold amid macro uncertainty.
Risk-tolerant investors may consider inverse silver ETF ZSL as downside risks continue to build.
Silver’s explosive rally in 2025 is beginning to hurt demand across key industries, with analysts warning that elevated prices could trigger further declines in the precious metal.
Unlike gold, silver has significant industrial uses and is more closely tied to the economic cycle. The metal is widely used in products such as computers, smartphones, solar panels and automobiles, making industrial demand a critical driver of prices.
According to a note published by UBS on May 22, silver’s roughly 140% rally last year has started discouraging purchases across several industries, as quoted on CNBC. “The demand erosion is likely to persist as long as prices remain at current levels,” UBS analysts wrote.
Lack of Central Bank Buying Leaves Silver Vulnerable
UBS noted that silver lacks the strong central bank demand that continues to support gold prices. As a result, silver is more susceptible to shifts in private investment and industrial demand.
The bank added that silver currently offers an unattractive risk-reward profile due to its heightened volatility.
Extreme Volatility Adds to Investor Concerns
Silver’s rally peaked on Jan. 28, when prices surged above $120 an ounce before plunging nearly 30% in a single day.
Although prices rebounded after touching a 2026 low of $67.60 per ounce on March 20, the metal remains far below levels seen before the Iran war intensified market volatility.
On Thursday, spot silver was hovering around $72.13 an ounce, while front-month U.S. silver futures declined to settle near $72.16.
HSBC Sees Silver as “Fundamentally Overvalued”
Analysts at HSBC believe silver prices remain disconnected from fundamentals and could continue underperforming gold, per the same CNBC article.
“We believe further room to the upside is limited as silver remains overvalued, in our view,” HSBC analysts wrote in a note published Thursday, as quoted on CNBC.
Macquarie Warns of Downside Risks Ahead
Strategists at Macquarie also see limited potential for a sustained recovery in silver prices.
The firm expects the U.S. Federal Reserve to raise interest rates in the first half of 2027, which could create additional pressure on precious metals, as quoted on CNBC.
Inverse Silver ETFs in Focus
Against this backdrop, investors may want to stay on the sidelines on the iShares Silver Trust (SLV - Free Report) . Investors with a strong stomach for risks may play inverse leveraged silver ETF ProShares UltraShort Silver (ZSL - Free Report) . The ZSL ETF charges 95 bps in fees.
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Silver Rally Faces Pressure: Time for Inverse ETFs?
Key Takeaways
Silver’s explosive rally in 2025 is beginning to hurt demand across key industries, with analysts warning that elevated prices could trigger further declines in the precious metal.
Unlike gold, silver has significant industrial uses and is more closely tied to the economic cycle. The metal is widely used in products such as computers, smartphones, solar panels and automobiles, making industrial demand a critical driver of prices.
According to a note published by UBS on May 22, silver’s roughly 140% rally last year has started discouraging purchases across several industries, as quoted on CNBC. “The demand erosion is likely to persist as long as prices remain at current levels,” UBS analysts wrote.
Lack of Central Bank Buying Leaves Silver Vulnerable
UBS noted that silver lacks the strong central bank demand that continues to support gold prices. As a result, silver is more susceptible to shifts in private investment and industrial demand.
The bank added that silver currently offers an unattractive risk-reward profile due to its heightened volatility.
Extreme Volatility Adds to Investor Concerns
Silver’s rally peaked on Jan. 28, when prices surged above $120 an ounce before plunging nearly 30% in a single day.
Although prices rebounded after touching a 2026 low of $67.60 per ounce on March 20, the metal remains far below levels seen before the Iran war intensified market volatility.
On Thursday, spot silver was hovering around $72.13 an ounce, while front-month U.S. silver futures declined to settle near $72.16.
HSBC Sees Silver as “Fundamentally Overvalued”
Analysts at HSBC believe silver prices remain disconnected from fundamentals and could continue underperforming gold, per the same CNBC article.
“We believe further room to the upside is limited as silver remains overvalued, in our view,” HSBC analysts wrote in a note published Thursday, as quoted on CNBC.
Macquarie Warns of Downside Risks Ahead
Strategists at Macquarie also see limited potential for a sustained recovery in silver prices.
The firm expects the U.S. Federal Reserve to raise interest rates in the first half of 2027, which could create additional pressure on precious metals, as quoted on CNBC.
Inverse Silver ETFs in Focus
Against this backdrop, investors may want to stay on the sidelines on the iShares Silver Trust (SLV - Free Report) . Investors with a strong stomach for risks may play inverse leveraged silver ETF ProShares UltraShort Silver (ZSL - Free Report) . The ZSL ETF charges 95 bps in fees.