Silver Market Analysis: Supply Deficit Drives Rally Over $79

Author: James Hyerczyk

Published: December 29, 2025

Key Highlights

• Spot silver prices surged 18.08% last week, closing at a record $79.31.
• The rally was primarily driven by a supply deficit and the U.S. designation of silver as a critical mineral.
• Technical analysis indicates potential correction signals at these record highs.

Market Overview

Spot silver experienced a significant increase of 18.08% last week, culminating in a closing price of $79.31. This surge was particularly pronounced on Friday, attributed to thin trading volumes following the Christmas holiday. Analysts noted that the price action was smooth, suggesting that either a large buyer or a collective of buyers was responsible for taking out weak bids, leading to the record high.

Technical Analysis

As silver prices reach all-time highs, the importance of monitoring topping chart patterns increases. The closing price reversal top pattern is highlighted as a key indicator of potential market corrections. This pattern is characterized by a close below the midpoint of the day's session and the opening price, signaling a shift from buying to selling pressure. Traders are advised to be cautious during low-volume periods, as these can lead to volatile price swings.

Fundamental Drivers

Contrary to popular belief, the recent price surge is not primarily driven by geopolitical events or Federal Reserve rate cuts. The author argues that the real driver behind the rally is the supply deficit in the silver market, compounded by the U.S. government's recognition of silver as a strategic metal. Historical context is provided, referencing past market behaviors during similar conditions, indicating that supply dynamics are the core factor influencing current prices.

Future Outlook

Looking ahead, the market is expected to remain thinly traded, particularly in the immediate aftermath of the holiday season. The closing price of $79.31 will serve as a critical pivot point for traders. Long-term investors may choose to ride out volatility, while short-term traders should develop exit strategies to mitigate potential losses. The author emphasizes that while the current rally is significant, it is essential to remain vigilant about market corrections and the eventual rebuilding of silver supply.

Conclusion

The silver market is currently experiencing a historic rally driven by fundamental supply issues rather than external geopolitical factors. Traders and investors should remain aware of technical indicators and market dynamics as they navigate this volatile environment.