Silver’s Next Big Move: Breakout Looms Amid Gold Weakness and Supply Deficit

Silver (XAG) is entering a pivotal phase as shifting supply dynamics, rising industrial demand, and a volatile macro backdrop reshape its outlook. The metal is viewed as both a monetary hedge and an industrial asset. It has attracted renewed investor attention due to inflation pressures, Federal Reserve policy shifts, and surging clean energy demand.

Moreover, historical price cycles, technical structures, and the gold-to-silver ratio (XAU-XAG) are sending critical signals about silver’s next move. This article explores the fundamental, macroeconomic, and technical forces shaping its trajectory. The price is currently attempting a long-term breakout above $30, which could set the stage for a strong multi-year rally.

Silver Price Breakout Signals the Start of a Powerful Bull Market

Silver Outperforms Dollar and S&P 500, Eyes Multi-Year Breakout

The strong rally in silver highlights its dual role as a monetary asset and an industrial metal. Both forces have turned strongly supportive in 2025, driving the price higher. At the same time, a structural supply deficit and falling mine output continue to tighten the market. The outlook remains bullish as momentum builds on both fundamental and technical fronts.

The chart below shows that gold (XAU) and silver are strongly outperforming the US dollar and the S&P 500 (SPX) in 2025. Gold has risen steadily and remains near record highs. Silver has also surged sharply this year. This outperformance presents growing investor demand for hard assets amid a weakening dollar. Despite strong gains, silver remains historically undervalued relative to gold based on the gold-to-silver ratio. This suggests silver still has room to catch up, offering investors relative value in the current market.

Industrial Demand and Supply Deficits Fuel Silver Surge

Silver has been in a structural deficit since 2021. The cumulative shortfall from 2021 to 2025 is nearly 800 million ounces. This imbalance indicates the pressure on supply as demand accelerates across multiple sectors.

The electrical and electronics industry has emerged as the largest driver of this demand. Since 2016, silver use in this sector has surged by 51%. Silver’s unique role as the most conductive metal makes it irreplaceable in solar panels, EVs, 5G networks, and consumer devices.

Solar photovoltaics have become a key pillar of silver demand. In 2015, PV accounted for just 5.6% of total demand. However, by 2024, that figure increased to 17%. China led this trend by expanding solar capacity by 45% in 2024. However, advances in “thrifting” technology limited silver usage per panel, keeping PV demand relatively flat despite record installations.

According to EIA, renewables will provide nearly half of global electricity generation by 2050, with solar leading the growth. This trend implies strong and sustained demand for silver, given its critical role in solar panels and other renewable technologies.

On the other hand, the investment demand continues to act as the market’s wildcard. Silver-backed ETPs absorbed 95 million ounces in the first half of 2025 alone. Since 2019, over 1.1 billion ounces have been taken out of the available supply. This leaves less silver for industrial use and makes the market more sensitive to fresh buying.

Silver is driven more by retail demand than central bank control. The shrinking pool of freely traded supply has made the market increasingly volatile. Even small inflows from investors can trigger sharp price spikes. This dynamic raises the risk of a potential “silver squeeze.”

How Rising Prices Impact Silver Demand

The chart below shows that US producer prices surged in July, rising 0.9% compared to expectations of 0.2%. This sharp rebound from June signals higher CPI in the coming month. The rise in inflationary pressure creates a supportive environment for silver as investors hedge against price instability.

Moreover, liquidity conditions remain strong. The Chicago Fed National Financial Conditions Index closed at -0.55, signalling loose credit and support for equities. At the same time, Fed Chair Powell at Jackson Hole hinted at possible rate cuts as soon as September, putting additional downward pressure on the US dollar. A weaker dollar further strengthens the bullish case for silver.

Core PCE has remained above the Fed’s 2% target for more than four years. With interest rates still elevated, silver could benefit if monetary policy shifts toward easing while inflation persists. The chart below shows that ISM services increased to 69.9% in July 2025 from 67.5% in June, the highest since October 2022. This surge reflects steep cost increases, and import tariffs are likely to worsen this trend by pushing costs onto consumers.

On the other hand, inflation expectations are rising, as shown in the chart below. Silver tends to gain in such environments as a hedge against loss of purchasing power.

A Deep Dive Into Historical Price Action for Silver

The historical price action for silver shows that it is emerging from a long-term pivotal zone near the $30 level. A breakout above this area could trigger a major rally lasting for decades.

The yearly chart below reveals a large cup-and-handle pattern, with the cup formed between the 1980 high and the 2011 peak, and the handle developing since 2011. The neckline of this pattern lies between $30 and $31. This zone is where silver has never posted a yearly close above $31.

In 2024, silver attempted to break above this level but failed to close higher. Silver is again trying to trade above $31 in 2025. A confirmed yearly close above this region would validate the breakout and likely mark the beginning of the next major upward cycle.

The long-term price structure of silver is shown in the chart below. The chart highlights major spikes in 1980, 2009, and 2011. Each time, prices retreated to close back below $31, leaving long shadows on the yearly candles.

The black ascending trendline marks the upper boundary of a long-term bullish channel. Silver has never posted an annual close above this trendline. In 2025, this resistance stands near $32.70.

For a confirmed breakout and the next sustained surge, silver must close above this level. If the price closes below $32.70 by December, the 2025 rally could once again be viewed as a false breakout or bubble, potentially leading to a short-term correction.

However, the presence of a well-formed cup-and-handle pattern, along with a strong base before this rally, suggests that silver is likely preparing for a much larger move higher from current levels.

Technical Analysis: Key Levels and Chart Patterns

The bullish setup for silver is also seen on the quarterly chart below. The chart shows that silver has never recorded a quarterly close above $37.65. The highest close, set in 2011, forms the neckline of a long-term cup-and-handle pattern. Therefore, the $38 to $50 zone marks a central resistance area for spot silver. A decisive break and close above this zone would likely trigger a strong, multi-decade rally.

Silver is now entering this critical blue resistance range. A close above it in Q3 2025 is essential to unlock further upside in Q4 2025. Additionally, the breakout above the orange trendline within the cup-and-handle formation confirms that the next bullish phase has likely begun. Prices are now poised to continue higher following this breakout.

Gold-to-Silver Ratio Signals Silver Outperformance Ahead

Similar strength is also reflected in the gold-to-silver ratio, where each peak has historically coincided with major bottoms in silver prices, triggering strong rallies. The chart below shows the ratio trading within two ascending channel formations, suggesting an overall positive long-term trend for silver.

However, the ratio peaked at 105 and began a sharp decline in 2025. This decline within the ascending channel is forming a bear flag pattern. A breakdown below the 78 level would confirm the pattern and could trigger a move toward the 64 region.

This long-term decline in the gold-to-silver ratio typically corresponds with significant surges in silver prices. A sustained break below the 64 level could push the ratio further down toward the 30 region, a key historical support zone.

Silver Price Projections and Scenarios

Bull Case – Breakout to $50+

As discussed above, silver has formed a broad cup-and-handle pattern over the past four decades. Prices are still trading near levels last seen in the 1980s, reflecting a prolonged consolidation phase. This long-term sideways action has built a strong base for a potential breakout. The formation suggests that silver is now poised for a powerful surge.

This breakout may be driven by rising industrial demand, particularly from the renewable energy sector, and a structural shift in the silver market. A yearly close above the $30–$31 range in 2025, followed by stability in 2026, would confirm the breakout and support a sustained long-term rally.

The chart below shows room for further upside, with potential momentum carrying silver toward the midline of the ascending channel near the $100 region. After reaching that level, prices may retest the $50 breakout zone before continuing higher toward new multi-decade highs.

Base case – Consolidation around $35–$40

The second scenario is that silver prices fail to break above the $50 level, which remains a key multi-decade resistance. If prices approach this level and face rejection, they may pull back toward the $30 region or even lower. This could result in an extended period of consolidation within the $18 to $50 range.

These consolidations would help build a base for the next phase of growth. Despite short-term weakness, strong structural demand continues to support a bullish long-term outlook. This consolidation phase may ultimately lead to a breakout, setting the stage for the next significant surge in silver prices.

Conclusion: Silver’s Next Big Move

Silver has reached a historic inflection point in 2025. After years of consolidation, the metal is showing strong signs of a structural breakout. A decades-long cup-and-handle formation is taking shape, supported by tightening supply, rising industrial use, and heightened macro volatility. Silver’s unique position, as a monetary hedge and an essential component in high-growth sectors, gives it a competitive edge in today’s environment.

Historically, silver outperforms gold during bullish cycles. Its smaller market size and affordability for retail investors amplify upside moves. With deepening supply deficits and sustained demand from both industrial users and financial markets, the long-term bull case remains firmly intact.

At the same time, sticky inflation, resilient liquidity, and renewed fiscal pressure continue to support hard assets. The gold-to-silver ratio signals that silver remains deeply undervalued and well-positioned to outperform. Whether driven by investment inflows or industrial tailwinds, the conditions are in place for silver to enter a new bull cycle. A break above $35 has triggered a buy signal, with the $43 to $50 range now in focus. A decisive move beyond $50 would confirm the breakout and open the door to a strong multi-year rally.