Checking In On Silver Prices

The new year began with some trepidation regarding silver after it failed to finish 2024 with a new annual high close. However, the silver price has begun 2025 on solid footing, and now with the U.S. dollar looking like it might turn lower, perhaps we can start looking forward to a new breakout?

Silver Price Performance in 2024

It's not as if 2024 was a disappointment for silver. Far from it! Price gained about 22% on the year. However, my hope had been that the silver price would finish the year with its highest annual close ever, but after a mid-December swoon, those hopes were dashed.

In our 2025 macrocast, I stated my belief that silver would follow up 2024 with an even better year in 2025, and price has begun January with a rally. Spot silver ended 2024 at $28.97/ounce, and as of Monday, January 20, it's trading at $30.55. That's a handy gain thus far of $1.68 or about 5.8%. Not too shabby.

Silver Fundamentals and Supply Deficit

The silver price has some solid fundamentals behind it that should continue to serve it well in 2025 and beyond. For instance, after another supply deficit that is projected to exceed 200,000,000 ounces in 2024, the total supply deficit for the past four calendar years will exceed 700,000,000 ounces. With industrial, solar, and EV demand continuing to grow in the years ahead, the world is poised to continue consuming more silver than it mines and recycles.

In just about any good or commodity, higher demand combined with falling supply signals higher prices. Silver should be no exception.

The U.S. Dollar Index and Its Impact on Silver

There may also be a key short-term driver in play, and that's a falling U.S. dollar index. Over time, silver prices hold a close, inverse correlation with the U.S. dollar index. It's not true of every day but, in general, a rising dollar leads to lower silver prices and vice versa. Perhaps a better way to think of it is in nautical terms: A rising dollar provides a headwind for silver prices while a falling dollar provides a tailwind.

I mention this today because finally, after trading consistently higher since late September, it appears that the trend in the dollar index is shifting. Check the chart below:

While it's still too early to proclaim a short-term top in the dollar index, note that the current pullback has violated both its primary trendline (the blue line) and its 20-day moving average (the red line). A clean break of the 50-day moving average (the green line) and we might be onto something.

And consider this chart that was included in our 2025 macrocast. Notice that the dollar index had a similar performance in response to Trump's first election in 2016. It moved higher in November and December, only to fall in January as President Trump declared his preference for a "weaker dollar" to help with trade. Could this correlation continue in the months ahead?

Short-Term and Long-Term Silver Price Targets

So, if we are in the early stages of a rally in silver, how far might the silver price move in the weeks ahead? Again, fundamentals are strong and we may soon have the "tailwind" of a declining dollar.

The chart below is of the Mar25 COMEX futures contract. Notice that price is above its own 20-day and 50-day moving averages but has not yet closed above the downtrend line that stretches back to the highs seen in late October.

If price is going to continue the rally that began on the first trading day of 2025, it first needs to close above that red downtrend line and $32. From there the next target is $33, and once it bests that level, those October highs near $35 will come into view. If I'm correct about the trend change in the dollar index, then those price targets are very likely to be attained here in Q1.

But what happens from there? Once price trades above those October highs, the next target will be $38-39. Now that may not sound like much, but keep in mind that a move to the high $30s would be about a 20% gain from here AND it would place the silver price at the highest level it has seen since late 2011!

Higher levels would inevitably follow later this year, but let's not get too far ahead of ourselves just yet. Instead, let's focus upon these attainable goals in the short term while keeping an eye on a shifting trend in the dollar index that could really spur things along in the weeks ahead.

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