Silver (XAG) Forecast: Will Silver’s Supply Deficit Spark the Next Rally?

Can Tight Supply and Surging Demand Lift Prices Further?

Silver’s performance next year will be driven by tightening supply and accelerating industrial demand, with Federal Reserve policy and gold’s movements playing supporting roles. While silver trades near $29.62, traders are assessing whether ongoing supply deficits and rising usage can sustain higher prices or if dollar strength will pressure the market.

Is Demand Outpacing Supply?

Silver supply continues to lag behind demand growth. Production increased by just 2% in 2024, reaching 1.03 billion ounces, while demand is forecast to hit 1.21 billion ounces by the end of the year. This 182-million-ounce deficit marks the fourth consecutive year of shortages, reinforcing concerns over long-term availability.

Industrial demand remains the primary driver, with consumption rising 7% in 2024. Silver’s essential role in renewable energy, electric vehicles, and electronics continues to expand. Projections suggest that by 2050, solar panel manufacturing alone could consume nearly the entirety of annual silver output. With limited new mining projects and much of the accessible high-grade silver already extracted, these deficits could persist for years.

How Will Gold and Fed Policy Shape Silver’s Performance?

Gold’s recovery from recent losses highlights continued investor demand for safe-haven assets. Silver often tracks gold but with greater volatility, reflecting its dual role as both an industrial and precious metal. As the Federal Reserve signals only modest easing in 2025 – with 50bps of total cuts projected – the stronger dollar may present near-term resistance for silver​. However, any softening in the dollar, driven by weaker economic data or shifting Fed rhetoric, could open the door for silver to rise alongside gold.

Traders will be closely monitoring Powell’s post-meeting comments and inflation data. Should gold attract significant buying interest as a hedge against inflation or geopolitical risk, silver is likely to follow.

Where Are the Value Zones for Silver?

Silver’s key value zone sits between $28.40 and $26.87, marking the 50% to 61.8% retracement of the 2024 rally from $21.93 to $34.87. This is the area where buyers are likely to step in if the price slide continues.

The 200-day moving average at $29.69 is the real battleground. Silver needs to reclaim this level to shift momentum and turn the longer-term trend up. Until then, any rallies that stall below the 200-day could invite more selling.

If price dips into the retracement zone, traders will watch for signs of stabilization or buying interest. A firm hold in this area could set the stage for silver to push back toward $30.53 and $31.47 – key resistance levels that need to clear before retesting 2024 highs near $34.87.

This retracement zone isn’t just technical – it reflects where fresh capital often flows in during corrective phases, making it a critical area for traders tracking silver’s next potential rebound.

More Information in our Economic Calendar.