Silver Poised For A Breakout

While gold prices surged to a new all-time high of USD 3,500 on April 22nd following a spectacular rally, silver continues to trade significantly below its strong resistance zone around USD 35. Despite gold’s bullish momentum, silver has yet to revisit its October peak of USD 34.89. Silver Chartbook – Poised For A Breakout.

Instead, silver prices have been cunningly moving in a deceptive sideways consolidating, trading primarily between USD 32 and USD 33, since mid-April. Beforehand the silver market witnessed a sharp V-shaped recovery from a brief crash in early April, when prices dropped from USD 34.58 to USD 28.31 before rebounding to USD 33.69.

Silver Appears Extremely Undervalued

With a gold/silver ratio just below 100, silver lags far behind gold. The long-term average gold/silver ratio since 1970 is approximately 55:1, meaning it has historically taken about 55 ounces of silver to purchase one ounce of gold, though it has fluctuated widely from 15:1 in silver’s favor (e.g., 1980) to over 100:1 during weaker periods (e.g., early 2020s). With the current ratio near 100:1 as of May 21st, 2025, silver is significantly undervalued – arguably dirt cheap – relative to its historical norm. This disparity suggests a compelling opportunity for silver to potentially outperform gold if the ratio reverts toward its long-term mean.

Nevertheless, silver has nearly doubled in value over the past two and a half years. Still, many silver investors are disappointed, impatiently awaiting the spectacular surges seen in past bull markets, such as in 2011 and 1980. Interestingly though, over the past five years since the 2020 COVID crash, silver has significantly outperformed gold.

Silver Supply and Demand

Fundamentally, according to our colleagues at the In Gold We Trust Report 2025, a fifth consecutive supply deficit of -117.6 million ounces is projected for 2025. Cumulatively, this amounts to a staggering deficit of nearly 800 million ounces between 2021 and 2025 – equivalent to an entire year’s global silver mine production!

Silver Supply and Demand 2016–2025, as of May 12, 2025. Source: The Silver Institute

Silver demand is primarily driven by industrial use, particularly in photovoltaics, which hit a record high of 197.6 million ounces in 2024. The outlook for silver remains promising, bolstered by innovations like Samsung’s silver-based solid-state batteries, which promise to double energy density.

Gold Price Action Remains The Most Critical Factor For Now

Ultimately, however, gold price action remains the most critical factor for silver’s immediate price trajectory. The expected breakout above USD 35 for silver depends heavily on gold market stabilization, which is currently experiencing a volatile consolidation between USD 3,120 and USD 3,400ish. Should the gold/silver ratio revert to its historical average since 1970, silver could easily climb to USD 50, assuming a current gold price of approximately USD 3,300.

Silver in US-Dollar, Daily chart

Silver in US-Dollar, weekly chart as of May 21st, 2025. Source: Tradingview

Since April 23rd, silver has been consolidating its sharp recovery, which followed a brief crash amid collapsing stock markets in early April. At that time, silver plummeted from USD 34.58 to USD 28.31 within days, only to rebound sharply in a V-shaped recovery to USD 33.69.

The sideways consolidation since then appeared erratic and deceptive but retained clearly an underlying bullish tone. Following a robust upward surge on Tuesday, May 20th, 2025, silver appears to be breaking out of its sideways consolidation, which has formed a flag pattern. Although silver might briefly retest its rising 200-day moving average at USD 31.39 for support, the trajectory now points toward higher resistance levels. Additionally, at USD 31.89, the lower Bollinger Band and the steadfast uptrend line from February 2024 offer further support, reinforcing the bullish outlook.

Gold closed its open gap at around USD 3,320ish

For silver to continue breaking out of its flag consolidation pattern, it will need support from the gold price. The gold market, however, is currently in a volatile correction phase, marked by a sharp sell-off from USD 3,435 to USD 3,120, followed by a strong recovery to USD 3,320. The open gap at USD 3,320 has been closed as of this morning. However, our roadmap of volatile consolidation at high levels is holding true so far. But this wild, volatile back-and-forth in the gold market is not for the faint of heart and can always drag down silver as well. We suspect this volatile consolidation could persist for a while before the gold market calms down a little bit and the next upward trend phase begins.

Therefore, silver investors will need to remain patient accordingly. Nevertheless, we view the downside risk for silver as very manageable. The medium-term opportunity remains a potential rise to USD 50, at least. Until this breakout begins, silver investors should brace for a few more deceptive maneuvers within or above the flag pattern, as silver loves nothing more than to keep everyone guessing.

Conclusion: Silver – Poised For A Breakout

While gold soared from one all-time high to the next through mid-April, silver has notably lagged behind expectations. Our optimistic forecast of a rise to approximately USD 50 has yet to materialize but remains highly plausible.

Since mid-April, silver has traded within a narrow sideways range, predominantly between USD 32 and USD 33, despite nearly doubling in value over the past two and a half years – a performance that has left many investors frustrated by the absence of the dramatic surges seen in previous bull cycles. We believe a breakout above USD 35 is just a matter of time.

Unveiling Silver’s Bullish Potential Amid Supply Constraints

Fundamentally, silver’s persistent supply deficit underscores its clear undervaluation, while technically, it is consolidating its swift recovery from the early April dip. Though the current sideways trend appears erratic, it retains a bullish outlook, hinting at an approaching breakout. An upward surge past USD 35 should unleash significant bullish momentum, potentially propelling silver swiftly toward USD 50, with strong medium-term prospects for substantial price gains.

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