The closest support is the low of $28.75. If this trend continues, the price could rebound to the pivot at $30.44. Overcoming this level will shift momentum to the upside, increasing the likelihood of a short-term surge into the resistance cluster formed by another pivot at $32.26 and a minor top at $32.33.
If we can earn $28.75 with conviction, it opens the door to a potential surge with an initial target of $26.47 to $26.02.
Long-term outlook to support supply shortages and industrial demand
Silver supply and demand imbalances will continue to be a supportive factor in the long term. Production rose just 2% to 1.03 billion ounces in 2024, but demand rose 7% to 1.21 billion ounces, leaving the market in the red by 182 million ounces. This marks the fourth consecutive year of supply shortages, primarily driven by industrial applications related to green technology. Demand from solar panel manufacturing and electric vehicle production continues to outstrip supply, reinforcing the long-term bullish outlook for silver.
China's $411 billion infrastructure stimulus plan for 2025 is expected to further boost silver consumption, in line with the country's renewable energy efforts. The industrial demand associated with these projects could significantly tighten the supply and demand relationship for silver in the future.
Fed policy and bond yields determine short-term performance
The Fed's cautious approach to rate cuts remains a major hurdle for silver. After cutting rates three times in late 2024, the Fed has signaled plans to ease by just 50 basis points in 2025. This cautious stance has supported the dollar, kept Treasury yields rising and made non-yielding assets like silver less attractive. The yield on the 10-year Treasury currently sits at 4.631%, increasing the opportunity cost of silver.
Geopolitical uncertainty provides modest safe haven support
Support for silver remains limited due to geopolitical risks. While gold remains the primary safe-haven asset in times of uncertainty, silver indirectly benefits. Ongoing conflicts in Ukraine and the Middle East, along with central bank gold purchases, have helped stabilize the precious metals market and prevented a significant decline in silver.
