Silver prices achieved a major technical breakthrough last week, with prices surging above the key $37 resistance level to close at $38.38/oz on Friday—a 14-year high representing a 3.4% weekly gain. Despite this strong performance, multiple indicators suggest silver remains historically undervalued.
Three Drivers Behind the Rally:
The current gold/silver ratio remains below 90:1 (meaning one ounce of gold buys approximately 90 ounces of silver), significantly higher than the modern historical average of 60:1.
Historical patterns show extreme ratios eventually revert to the mean: During the 2020 COVID pandemic, the ratio peaked at 123:1 before plunging to 60:1 amid global central bank quantitative easing. After the 2008 financial crisis, the ratio fell from over 80:1 to 30:1 by 2011.Notably, the ratio exceeded 100:1 before the recent rally, indicating silver has narrowed the gap but still has significant room to revert towards its historical mean.
Institutions remain bullish on silver, citing the onset of a commodity supercycle, its dual role as a financial asset and industrial input for clean energy technologies, and a market facing its fifth consecutive year of supply deficit.
The silver market recorded its fourth consecutive annual supply deficit in 2024, driven by record industrial demand. However, total demand fell 3% due to weak investment demand. This appears to be changing: Global silver ETF holdings increased by 95 million ounces in H1 2025 to 1.13 billion ounces, just 7% below the February 2021 peak. Separately, Sprott Asset Management USA announced last Wednesday that its Sprott Silver Miners & Physical Silver ETF (Nasdaq: SLVR), launched in January, surpassed $100 million in Assets Under Management (AUM).
Aaron Hill, Chief Analyst at FP Markets, stated robust industrial demand (6.774 billion ounces in 2025, driven by green technology applications like solar panels and EVs) combined with supply shortages exacerbated by geopolitical tensions in key mining regions (e.g., Russia, Mexico) support prices. TD Securities (TDS) highlighted in a June report that LBMA’s freely tradable silver stands at approximately 155 million ounces—the lowest level on record.
Silver’s price chart shows a “secular cup-and-handle pattern” spanning decades. The cup is formed by the twin peaks around $50/oz in 1980 and 2011, followed by a 14-year sideways consolidation forming the “handle” after the 2011 peak. Current technical indicators suggest silver is initiating a new upward leg similar to the move seen in June.
