Commodity: Outlook For Silver Remains Subdued But OCBC Sees A Silver Lining Ahead

Sun Aug 02 2026

Silver prices are expected to remain under pressure in the near term as elevated US real yields, a firm US dollar and lingering expectations of further monetary tightening by the US Federal Reserve continue to dampen investor sentiment, according to OCBC Malaysia.

The bank said silver struggled to sustain its early July rebound and was trading near recent lows, largely reflecting the same macroeconomic headwinds weighing on gold.

Although the Federal Reserve kept interest rates unchanged at its July meeting, markets continue to price in the possibility of further tightening should inflation remain persistent. Combined with concerns over energy-driven inflation, the environment has increased the opportunity cost of holding precious metals.

OCBC noted that silver’s higher-beta characteristics have amplified its price swings relative to gold, making the metal more vulnerable to shifts in investor sentiment.

Investor positioning also remained cautious. Data for the week ended July 21 showed managed-money long positions in silver increased modestly, but short positions rose by an even greater amount, resulting in a slight decline in overall net-long exposure.

“This suggests the market has stabilised after the earlier liquidation, but investors have yet to rebuild meaningful exposure,” the research house said.

Despite the near-term challenges, OCBC does not believe silver has entered a structurally bearish phase.

The research house highlighted that silver continues to trade as a high-beta version of gold, with any sustained recovery likely to depend on softer US real yields, renewed weakness in the US dollar or stronger gold prices.

Fundamentally, the long-term outlook remains underpinned by tightening supply.

According to the World Silver Survey, the global silver market is projected to record a sixth consecutive annual supply deficit in 2026, with the shortfall expected to widen to 46.3 million ounces while mine production remains broadly unchanged.

However, demand dynamics are becoming increasingly mixed.

Industrial fabrication demand is forecast to decline by around 3%, primarily due to lower consumption from the photovoltaic sector as manufacturers accelerate efforts to reduce silver usage through thrifting and substitution.

Conversely, investment demand is expected to strengthen, with purchases of silver coins and bars projected to increase by approximately 18%.

OCBC believes silver’s near-term direction will remain volatile as investors assess the outlook for US monetary policy and global economic growth.

A moderation in US inflation, fading expectations of further Fed rate hikes and renewed investment inflows could support a stronger recovery in silver prices.

On the other hand, continued strength in the US dollar, persistently high real yields, further investor liquidation, weaker industrial activity and faster substitution away from silver in solar applications remain key downside risks.

While the ongoing structural supply deficit should provide some downside support, OCBC cautioned that it may not be sufficient to prevent price corrections during periods of unfavourable macroeconomic conditions.

“The structural deficit should help cushion weakness, but recent price action has shown it cannot prevent valuation resets when the macro backdrop turns against precious metals,” the report said.

On technical indicators, OCBC said silver was last trading around US$59 per ounce, with momentum remaining mildly positive although the Relative Strength Index (RSI) has flattened, suggesting prices are likely to trade sideways in the near term.

Immediate support is seen around US$54-US$55 per ounce, followed by stronger support at US$50 and US$45, while resistance levels are identified at US$58.60, US$63-US$64, and US$70.

OCBC has lowered its short-term forecasts to reflect the more challenging macroeconomic environment but still expects prices to gradually recover over the coming quarters.

The bank forecasts silver to average US$60 per ounce by the end of the third quarter of 2026, rising to US$62 in the fourth quarter, US$65 in the first quarter of 2027, US$67 in the second quarter and US$69 per ounce by the third quarter of 2027.

Source: https://www.businesstoday.com.my/