Silver Price Forecast: Why the Pullback From $120 Could Fuel the Next Rally

Silver (XAG) experiences renewed volatility, but the overall trend remains bullish. After surging to $120, prices sharply corrected to $64 which caused concern throughout the market. However this pullback was due to the historical overbought conditions within the strong bullish trend. This article presents the macro catalysts, technical structure and key intermarket signals driving the next move in silver.

Macro Forces Driving the Silver Surge

Safe-Haven Demand Rises as Risk-Off Returns

Silver price is showing strength as risk sentiment is shifting globally. The increase in geopolitical tensions and current US diplomatic frictions has triggered clear wave of risk aversion. Investors are moving out of risk assets and into safe haven plays. Gold spearheads this shift, but silver is gaining strong inflows as an alternative hedge.

Market participants are allocating more capital to precious metals as volatility increases. The recent breakdown in Bitcoin (BTC) below $70,000 confirms that risk off is back. This indicates appetite for hard assets. Silver’s dual role as an industrial metal and safe-haven asset makes it attractive in this environment.

COMEX Delivery Pressure Builds

One of the main triggers that makes silver stand out at the present time is the increased threat of physical delivery crunch at COMEX. The registered reserves have dropped to only 103 million ounces and open interest is 429 million. A system strains when a quarter of these contracts require delivery.

The threat of default in delivery is not only theoretical. March is already a challenge and pressure can be repeated in May or July. The limited supply on the background of increasing demand triggers a burst of silver moves. This is a key driver that should be monitored.

Conditions Remain Loose, But Risk Is Rising

The chart below shows that Chicago Fed National Financial Conditions Index is loose at -0.557. However, the risk behavior is shifting.

Meanwhile, the sales of heavy trucks are further undermined. The sharp decline in past six months shows that the actual economy is decelerating.

Increasing apprehension in financial markets adds to these indications. A combination of easy monetary policy and tight supply along with increasing new demand for safe-haven assets makes a compelling case for rising prices. The macro drivers are in place, and momentum is gaining.

Silver Technical Outlook Remains Bullish After Correction

The silver price marked a high of $120 and dropped to $64. As previously discussed, this drop was expected due to emerging factors seen in the chart below.

The chart shows a similar move in 1979 and 1980, where RSI was peaking above 90. Similarly, the RSI reached same levels in 2026, whereby prices were extremely overbought in the short term and long term. These overbought conditions required a significant correction. The drop from $120 has taken RSI to 81.23, but this still does not satisfy the current conditions.

However, the strong bullish breakout above $50 indicates a strong bullish foundation. Therefore any correction toward $50 to $60 may indicate another rally.

The weekly chart below shows that the price peaked at $120, which was extremely overbought and extended level above the ascending broadening wedge pattern. This extension initiated strong recovery back toward the support of ascending broadening wedge pattern at $64.

The strong surge in silver prices was carried out after the breakout from ascending channel pattern at $50. Therefore, this correction now has strong support around $50 to $60. Last week’s correction to $64 indicates bullish strength and continuation of upward momentum in silver prices.

Based on current price action, the recent drop in silver from $120 does not show the initiation of a negative trend. However, this is a healthy correction and indicates another surge in silver in latter part of 2026.

Key Intermarket Trends Backing Silver’s Surge

Silver-to-CPI Ratio Breaks 40-Year Downtrend

The chart below shows that the silver to CPI ratio shows massive breakout from a 40-year downtrend. Silver formed a cup and handle pattern. The cup was formed from 1980 to 2011, while the handle was formed from 2011 to 2025. This pattern represents an accumulation for several decades. The breakout in 2025 came after silver finally broke through the line of resistance which capped price ratios since 1980.

This breakout indicates a change in the real value of silver as compared with inflation. This move suggests that silver is now moving into a new phase of long-term outperformance. Historically, such breakouts result in multi-year rallies, particularly if this is combined with supply pressure and increasing demand.

Silver-to-Gold Ratio Forms Double Bottom Recovery

The strength in silver is also observed using silver to gold (XAU) ratio, which shows a strong recovery from long‑term support area not seen since 1992. This strong recovery has produced a double bottom pattern, whereby the ratio is approaching the resistance of downtrend line.

After reaching this resistance, the ratio initiated a correction back to 0.015, which is the red dotted support line. This correction is related to the correction in silver from $120 to $60. This indicates that the ratio is likely to trend higher, which signals continued strength in silver. However, a break above 0.02 in this ratio will indicate strong leadership in the silver rally and suggest continuation over the next few months.

In Closing: Silver Correction Sets the Stage for the Next Rally

The recent correction in silver from $120 to $64 reflects a reset after extreme overbought conditions. Macro conditions support higher prices and safe-haven demand is rising. Moreover, the physical delivery pressure is growing, and financial conditions remain loose.

Silver has also broken major technical ratios against CPI and gold, showing strength not seen in decades. This confirms a long term shift in silver’s value. The support zone between $50 and $60 remains critical. A rally from this support zone could lead to another breakout later in 2026.

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