Silver’s breakout: Is the long-awaited bull market finally here?

By willowt // 2025-03-18

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After lagging behind gold, silver is showing signs of a powerful bull market, breaking above key resistance levels (32-33 USD and €30). A decisive close above 34-35 USD or €32 could confirm the start of a significant rally, mirroring gold’s breakout in 2024.
Silver remains undervalued compared to gold, with the gold-to-silver ratio at 88, far above its historical average of 53. A reversion to historical averages could push silver prices significantly higher, potentially reaching 56.32 or even 158.87 per ounce.
A persistent structural deficit in silver supply has existed for five years, with demand outstripping supply by 182 million ounces in 2024. Declining mine production and surging industrial demand, particularly in solar panel manufacturing, exacerbate this imbalance.
Bullion banks hold a massive net short position in COMEX silver futures, equivalent to 211 million ounces. A breakout could trigger short-covering and a potential short squeeze, amplified by the high ratio of paper silver (378:1) to physical silver, driving prices sharply higher.
Rising inflation, economic uncertainty and geopolitical tensions are driving investors toward safe-haven assets. Silver’s dual role as both a monetary and industrial metal positions it for significant upside, making it a compelling investment opportunity in the current climate.

After years of playing second fiddle to gold, silver is finally showing signs of breaking out. With gold soaring to record highs in 2024, silver has lagged behind — until now. Recent price action suggests that silver may be on the verge of a powerful bull market, one that could rival or even surpass gold’s impressive rally. But what’s driving this potential breakout, and why does it matter for investors today?

The technical case for silver’s breakout

Silver’s recent price movement has been nothing short of intriguing. After months of choppy trading, the metal has decisively broken above the 32 to 33 resistance zone—a level that has acted as a stubborn ceiling for much of the past year. According to Jesse Colombo of BullionStar, this breakout is a critical first step. “The next crucial confirmation will be a strong, high-volume close above the 34 to 35 resistance zone,” he explains. “Once silver clears both barriers, the path should be wide open for the powerful bull market I’ve anticipated since April 2024.” This technical setup mirrors gold’s breakout in March 2024, when it finally surged past the 2,000 to 2,100 resistance zone that had capped its price for years. If history is any guide, silver could follow a similar trajectory, potentially soaring to new highs. Adding to the bullish case is silver’s performance in euro terms, which strips away the influence of U.S. dollar fluctuations. Silver recently broke above the €30 level, establishing it as a new support zone. A decisive close above €32—the late October high — would signal the next phase of the bull market.

The gold-silver connection and undervaluation

Historically, gold and silver have moved in tandem, with silver often lagging before catching up. Gold’s impressive rally over the past year has set the stage for silver to shine. Colombo notes, “The higher gold climbs, the more undervalued silver will become relative to gold, making it increasingly difficult for silver to remain at these relatively low levels.” The gold-to-silver ratio, a key metric for precious metals investors, currently stands at 88 — far above its historical average of 53 since 1915. If the ratio were to revert to this average, silver would be priced at 56.32 per ounce, a 6633.87 ratio. Even more striking, if the ratio were to return to its 1792 level of 15:1, silver would trade at $158.87 — an astronomical 369% gain. Silver’s undervaluation becomes even more apparent when adjusted for inflation. During the Hunt brothers-induced spike in 1980, silver reached an inflation-adjusted price of 196. In the 2011 bull market, driven by quantitative easing, it hit 71. Today, at just $33.87, silver has significant room to rise to catch up with these previous peaks.

Supply-demand imbalance: A ticking time bomb

One of the most compelling reasons to believe in silver’s bull market is the persistent supply-demand imbalance. For the past five years, silver demand has consistently exceeded supply, resulting in a structural deficit. In 2024 alone, the shortfall reached 182 million ounces, with an estimated additional 149 million ounces this year. The supply crunch is exacerbated by declining global mine production, as economically viable deposits become depleted. On the demand side, silver’s industrial applications — particularly in solar panel manufacturing — are surging. Silver demand for photovoltaic (PV) applications has nearly tripled over the past four years, increasing by 143.1 million ounces. As the world shifts toward renewable energy, this trend is only expected to accelerate. The dwindling above-ground silver inventories further highlight the severity of the deficit. Total London Bullion Market Association (LBMA) silver inventories have fallen by 30% since their peak in 2021, while COMEX silver inventories have dropped by 27%. In China, silver inventories on the Shanghai Gold Exchange have plummeted by an astonishing 73%.

The potential for a #SilverSqueeze

Adding fuel to the fire is the massive short position in COMEX silver futures held by bullion banks. Swap dealers, primarily trading desks of banks like JPMorgan and UBS, have built a net short position of 42,116 futures contracts—equivalent to 211 million ounces of silver, or a quarter of the world’s annual production. Much of this short position is “naked,” meaning it isn’t backed by physical silver. As Colombo explains, “Once silver finally breaks out, it could trigger a wave of short-covering, dramatically amplifying the rally.” If the buying pressure intensifies, it could even lead to a short squeeze, sending silver prices skyrocketing. The risk is further amplified by the astonishing ratio of 378 ounces of “paper” silver (ETFs, futures and other derivatives) for every single ounce of physical silver. In a violent short squeeze, holders of paper silver could scramble for scarce physical silver, causing prices to reach jaw-dropping levels.

Why this matters today

Silver’s potential breakout comes at a time of heightened economic and geopolitical uncertainty. Rising inflation, a looming U.S. recession and escalating conflicts in the Middle East and Eastern Europe are driving investors toward safe-haven assets. While gold has been the primary beneficiary of this trend, silver’s dual role as both a monetary and industrial metal positions it for significant upside. Moreover, silver’s undervaluation relative to gold, combined with its persistent supply-demand imbalance, makes it a compelling investment opportunity. As Colombo puts it, “Silver is a beach ball being held underwater—pressure is building, and it won’t stay suppressed for much longer.”

A new era for silver?

Silver’s recent breakout could mark the beginning of a new era for the metal. With gold leading the charge and silver poised to catch up, the stage is set for a powerful bull market. For investors, the key will be to watch for a decisive close above the 34 to 35 resistance zone—a move that could signal the start of a historic rally. As the world grapples with economic uncertainty, inflation and geopolitical risks, silver’s time to shine may finally be here. Whether it’s through a short squeeze, a reversion of the gold-to-silver ratio, or simply the laws of supply and demand, silver’s breakout could be one of the most significant financial stories of the decade. Sources include: Substack.com ZeroHedge.com