Silver jumped more than 4% on Tuesday, trading near $59 and breaking above a descending channel that had capped prices since May. The move lifts the metal from an eight-month low around $55 and sets up a run toward the 0.618 Fibonacci retracement level near $68.88 — roughly $68 — implying about 16% upside from current levels.
Why silver is rallying
Renewed hopes of US-Iran diplomacy cooled oil-driven inflation fears, pausing the oil rally. Brent crude is still up about 30% from its July lows, but the pause gave precious metals room to recover. Markets now price an 80% chance of a December Federal Reserve rate hike, up from 73% a week ago. Higher rates typically hurt silver because it pays no yield, but the metal has shrugged off that headwind for now.
Silver is about 45% higher than a year ago despite falling 13% over the past month. Tuesday's breakout suggests the recent selloff may have been a correction within a longer-term uptrend.
Supply deficit and demand
The Silver Institute projects a sixth consecutive annual supply deficit in 2026, estimated at 46.3 million ounces. Physical investment demand is expected to rise 20% to 227 million ounces. That structural shortfall has been a key factor supporting prices even as the dollar strengthened and rate expectations shifted.
Investors have been buying silver bars and coins at a pace not seen in years. The deficit outlook, combined with industrial demand from solar panels and electronics, keeps the fundamental backdrop tight.
Technical picture and risks
The daily chart still shows a bearish long-term structure — lower highs and lower lows since the record high above $121 in January. But the recent breakout from a descending channel may signal a trend reversal. A potential double bottom pattern formed at the $55 support zone, which aligns with the 0.786 Fibonacci level at $54.51. Bullish RSI divergence on the second low suggests selling pressure is fading.
The RSI is near 47, neutral territory, leaving room for further upside before overbought conditions kick in. But the bullish outlook depends on the breakout holding. A daily close back inside the channel would invalidate the pattern. Losing $55 could expose long-term support at $49.81.
A stronger dollar remains the main external risk. If the greenback resumes its rally, silver could struggle to hold its gains. Traders will watch the next few sessions closely to see if the breakout sticks.
