Silver (XAG) Forecast: Silver Rally Explodes to Record High on Supply Squeeze

Silver Blasts to Record Highs on Industrial Squeeze and Fed Bets

Spot Silver (XAGUSD) settled the week at $56.39, up $6.37 or +12.74%. Silver didn’t just rally this week—it broke out. XAGUSD smashed through its previous record of $54.49 set in mid-October and kept running, posting its biggest weekly gain since May 2024.

The 12.74% surge reflects a market where everything lined up at once: industrial demand that won’t quit, a supply deficit now in its fourth consecutive year, and a Fed that looks ready to cut again in December.

Technically, the main trend is up with no objective at this time. We should find out early in the week if Friday’s buying was real or just speculators taking advantage of a thin post-holiday market. The first line of defense will be the pair of tops at $54.49 to $54.39 since we all know that “old tops can become new bottoms.”

If the first support fails then the pullback may extend into $51.04 as part of a normal retracement. The main trend will remain up as long as the swing bottom at $45.55 holds, while moving average traders will tell us that the 52-week moving average at $37.27 is controlling the trend.

The Fed Tailwind

Rate-cut expectations drove a lot of this move. By Friday, traders had priced in nearly 90% odds of a December cut, up sharply from the week before. Fed officials, including Christopher Waller and John Williams, reinforced the dovish narrative. For a non-yielding asset like silver, that math works: lower rates shrink the opportunity cost of holding metal instead of bonds.

Supply Deficits Are Real

The structural story keeps getting tighter. The silver market has run a cumulative deficit of 678 million ounces over the past four years—equivalent to 10 months of global mine production. Industrial demand hit a record 680.5 million ounces in 2024, and 2025 is on pace to extend that streak.

Solar panels now account for roughly 14% of total silver demand, up from 5% a decade ago, and newer cell technologies like TOPCon require 50% more silver per gigawatt than older designs. Electric vehicles add another layer, using about twice as much silver as traditional cars.

London Vaults Under Pressure

Physical tightness showed up in the vaults. London Bullion Market Association holdings have dropped by roughly a third since mid-2022, falling to their lowest levels in years. Earlier this fall, overnight borrowing costs spiked to 200% annualized as traders scrambled to close positions. That’s not the kind of stress you see in a balanced market.

The Dollar Helped Too

A weaker dollar gave silver an extra push. With the DXY settling at 99.479, down 0.72% on the week, dollar-denominated metals got cheaper for international buyers—and they showed up.

Looking Ahead

Silver’s dual role as both precious metal and industrial commodity makes it volatile, but that same profile is driving the bull case. As long as solar buildouts continue, EVs expand, and mine supply lags, the structural bid stays intact. Near-term, the December Fed meeting and incoming economic data will set the tone.

f the cut comes with dovish guidance, silver has room to extend. A surprise hold would cool things off, but it wouldn’t change the underlying supply-demand picture that’s been years in the making.

More Information in our Economic Calendar.