Silver Breaks Out Resistance Zone to Signal Bull Market as Gold Soars

• Silver is breaking out above key resistance levels and remains historically undervalued relative to gold.
• Physical silver demand is outpacing supply, especially from solar panels, leading to persistent deficits.
• Massive paper short positions pose the risk of a short squeeze propelling silver prices higher.
• The Fed is likely to cut rates and restart QE in a recession, which would be very bullish for precious metals.
• Several well-positioned silver mining companies are advancing high-quality projects as the silver price rises.

As gold soars to new all-time highs above $3,000 per ounce, the counterpart silver maintains at $35 for much of the past year. A confluence of technical, fundamental, and macroeconomic factors suggests silver may finally be ready to play catch-up and embark on a powerful bull market of its own. For investors seeking to diversify their portfolios and capitalize on the shifting economic landscape, the white metal presents a compelling opportunity.

Silver Breaks Out From Resistance Levels

One of the most encouraging signs that silver is gaining strength is its recent move above crucial resistance zones that had previously kept a lid on prices. Silver moving above the $32-34 resistance zone is an important technical development. If silver can now close strongly above the $34-35 level that halted its late October rally, the path should be wide open for the powerful bull market that many analysts have been anticipating.^[1]

The breakout is also significant when priced in euros, as this strips out the influence of U.S. dollar fluctuations. In a report,

"Silver broke above the $34 level—a bullish signal—establishing it as a new support. Next, a decisive close above $37 (the late October high) is necessary to signal that the next phase of the bull market has begun."

Confirming this positive technical outlook, CPM Group's Jeffrey Christian stated that although profit-taking could cause prices to temporarily pull back,

"Given the economic and political uncertainties and anxieties and given the fact that April is an active COMEX delivery month, the gold price is relatively well supported"

Gold could climb up to $3,550. This would provide a strong tailwind for silver.

Silver Remains Historically Undervalued Relative to Gold

While silver has underperformed gold over the past year, this very fact suggests it has substantial room to catch up. According to the long-term gold-to-silver ratio chart, silver is significantly undervalued relative to the yellow metal. The current ratio stands at a lofty 89, meaning it takes 89 ounces of silver to buy one ounce of gold.

"If silver were to revert to its historical average of $53 since 1915—without any increase in gold's price—silver would be valued at a solid $55 per ounce (as compared to the current price of $32.65)^[1]

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Adjusting for inflation puts silver's undervaluation in an even starker light. During the Hunt brothers-induced spike of 1980, silver topped out at an eye-watering $196 per ounce in today's dollars. The 2011 bull market pushed the inflation-adjusted price to $71. Yet even after its nascent rally, silver presently trades under $35 - a level that leaves ample upside if it is to approach these previous peaks.

Massive "Paper" Silver Short Position Poses Squeeze Risk

Perhaps the single biggest factor that has kept a lid on silver prices over the past year, even as gold powered higher, is an unprecedented level of short-selling of silver futures by major bullion banks.

"These COMEX swap dealers have built up a staggering net short position of 30,233 futures contracts, equivalent to 151 million ounces of silver—nearly one-fifth of the annual global silver production," as the report cited.

Most worrying of all is how much of this gigantic short position is naked, backed not by physical silver but merely by the unlimited issuance of "paper" silver derivatives. This sets the stage for an explosive bout of short-covering and even a full-blown short squeeze, whenever silver musters enough upside momentum to seriously challenge these entrenched short sellers.

Surging Physical Demand Meets Declining Supply

Ultimately, the price of any commodity comes down to supply and demand. And in silver's case, the physical market is signaling that significantly higher prices will soon be needed to bring the two into balance.

Over the past five years, silver demand has consistently exceeded supply, resulting in a persistent deficit, which reached 182 million ounces in 2024 alone. Due to a combination of dwindling economically viable deposits and surging demand from solar panel manufacturers and other industrial users, these deficits are expected to continue for the foreseeable future, potentially exhausting above-ground silver stocks.

"The persistent silver deficit stems from both dwindling supply and surging demand—a combination that, in an unmanipulated market, would naturally drive prices higher. That's why I see silver as a beach ball being held underwater—pressure is building, and it won't stay suppressed for much longer."^[1]

While silver's bullish outlook is compelling based on its own supply and demand dynamics, the bigger macroeconomic picture looks set to provide a major boost to precious metals broadly. The same report argued that a U.S. recession would counterintuitively end up being extremely bullish for both silver and gold, as the U.S. Federal Reserve and government would respond with aggressive measures to support the economy.

Vizsla Silver

Vizsla Silver is rapidly advancing its flagship Panuco silver-gold project in Mexico. Key highlights include delivering an updated mineral resource estimate in January 2025 with 222 Moz AgEq in measured and indicated, and 139 Moz AgEq inferred, completing a PEA demonstrating robust economics with a post-tax NPV of $1.1B and IRR of 86%, and commencing a fully-permitted 10,000 tonne test mine in Q4 2024.

Vizsla is targeting the completion of a feasibility study in H2 2025 and first silver production in H2 2027, visioning to become the world's largest single asset silver primary producer through exploration and development of the Panuco district in Mexico.

GR Silver Mining

GR Silver Mining is exploring and developing multiple projects in the historic Rosario Mining District in Sinaloa, Mexico. The company recently resumed exploration drilling at its flagship San Marcial project after completing detailed geological, geochemical and geophysical data modelling. It also had success with a small-scale bulk sample test mining program at the historical San Juan mine in 2024, gaining valuable insights. GR Silver eliminated its working capital deficit in 2024 and is well positioned to continue advancing its projects in 2025.

Silver Tiger

Silver Tiger Metals provided a year-end review, highlighting the completion of a PFS for its El Tigre silver project in Mexico with an after-tax NPV of $222M and IRR of 40%. The company delivered an updated mineral resource estimate and commenced underground drilling of high-grade zones in 2024. Silver Tiger aims to complete a PEA on the underground resource in H1 2025. It ended 2024 with $7M cash and has several key objectives for 2025 including exploration drilling and securing project financing.

Defiance Silver

Defiance Silver is a silver explorer advancing projects in Zacatecas, Mexico, one of the world's most prolific silver belts. In January 2025, Defiance released an updated resource estimate for its Tepal gold-copper project, more than doubling measured and indicated resources. Exploration in 2025 will focus on high-grade gold-copper zones at Tepal and follow up on a new high-grade silver discovery at the Lucita South project, where first-pass drilling in 2024 returned up to 3,260 g/t silver.

Ridgeline Minerals

Ridgeline Minerals announced final 2024 drill results from its Swift gold project in Nevada, operated under an earn-in agreement with Nevada Gold Mines. Highlights include 24.7m grading 0.5 g/t Au. Nevada Gold Mines has approved a $5M exploration budget for 2025 to drill test new targets. Ridgeline noted the results demonstrate the significant scale potential of the gold system at Swift.

Sierra Madre Gold and Silver

Sierra Madre Gold and Silver reported record production numbers for January 2025 from its 100% owned Guitarra Mine Complex in Mexico after restarting operations and achieving commercial production. The mine and processing plant are operating at 500 tpd capacity. In January, 349 tonnes of concentrate were shipped grading 2,429 g/t silver and 32 g/t gold on average, with an additional 45 tonnes of inventory. Sierra Madre is well positioned for growth with its experienced management team that has discovered over 22 Moz gold and 600 Moz silver in reserves and resources.

Adriatic Metals

Adriatic Metals is advancing its high-grade Vares silver project in Bosnia towards expanded production. In 2024, Vares produced 1.3 Moz AgEq in its ramp up year. Commercial production is expected in Q1 2025 at the initial 800ktpa throughput, increasing to nameplate capacity of 1.3 Mtpa in 2027, which would make Vares one of the largest primary silver mines globally producing approximately 20 Moz AgEq/year based on reserves. Adriatic is conducting an institutional placement to raise A$80M to fund the plant expansion and mine studies. With US$96M in pro forma cash, Adriatic is well funded to complete the expansion while ramping up to commercial production.

The Investment Thesis for Silver

• Silver is at the start of a new bull market after breaking out above key long-term resistance levels at $32-34
• It remains historically undervalued compared to gold based on the gold-to-silver ratio, inflation-adjusted price, and money supply growth
• Physical demand is exceeding supply, especially from solar panels, leading to large deficits and dwindling stockpiles
• Massive paper short positions leave silver vulnerable to an explosive short squeeze
• The Fed is likely to cut rates and restart QE in response to a recession, which would be very bullish for precious metals
• Target starting a position in physical silver or qualifying mining stocks, using pullbacks as buying opportunities

While silver spent much of the last year in the shadow of gold's impressive advance to $3,000, the white metal now appears poised for a major catch-up rally. A combination of bullish technical breakouts, ongoing physical market deficits, a massive vulnerable short position, and a favorable macro backdrop of Fed stimulus in response to a recession are aligning to send silver significantly higher in the coming months.

For investors interested in diversifying their portfolios and gaining exposure to this unique opportunity, this may be an ideal time to start accumulating physical silver or the shares of well-positioned silver mining companies. As with any investment, a sound risk management strategy should be employed, and inevitable pullbacks should be viewed as chances to build a position at more attractive prices. But make no mistake, as the clouds over the global economy darken, silver's moment to shine may finally be arriving.

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References:

1. Durden, Tyler (March 2025). Zero Hedge. Why It's Silver's Time To Shine Now
2. Power, Bruce (March 2025). FXEmpire. Silver Price Forecast: Strengthens After Pullback, Eyes Break Above $34.08
3. CPM Group (March 2025). Gold Tops $3,000. Silver Close To $35: Economic Realities and What’s Next