After eight consecutive rises, silver has pulled back. Will this "silver bull market" crash after reaching new highs like it did in 1980 and 2011?

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Silver has started to pull back after hitting an all-time high, but analysts believe this time is fundamentally different from the two historical crashes; the supply-demand fundamentals and technical patterns are more like gold's recent breakthrough path.

On Friday, silver continued its pullback, once falling below the $57 mark. Earlier this week, it had hit a historic high of nearly $59 per ounce after eight consecutive days of gains, with a single-day drop exceeding 2%. The 14-day Relative Strength Index shows silver has retreated from the overbought zone to below 70, indicating the rapid upward momentum has eased.

Silver's cumulative gains this year have nearly doubled, leading some market participants to worry about a repeat of the crash scenarios in 1980 and 2011—when silver quickly gave up all gains after breaking above $48. But Sprott Money analyst Craig Hemke believes the current economic, monetary, and physical supply environment is completely different from the past.

The volatility in silver prices actually reflects a deep shift in the supply-demand landscape. Although London's silver shortage has recently eased, Chinese inventories are near ten-year lows, and the market is facing its fifth consecutive year of structural supply deficit. Expectations that the Federal Reserve will cut rates next week are providing further support for this non-yielding asset.

Will History Repeat Itself?

The silver bull markets in 1980 and 2011 both ended similarly.

In 1980, silver surged from $10 to $48 within four months, only to drop back to $10 two months later.

During the bull market starting late 2010, silver rose to $48 in eight months, then fell back to $26 in the following months.

These two crashes have left the current market full of doubts. Some traders worry that, like the last two times, silver will be quickly sold off after breaking above $48. Some analysts even believe silver has formed a bearish double-top pattern this year.

But Hemke points out that the technical pattern of this round is clearly different. Silver broke above $48 on October 3 last year, closed above $50 for the first time a week later, and after multiple tests of support around $48, continued to rise. This ability to hold the $48 mark was not seen in 1980 or 2011. He stated that to confirm a double-top pattern, silver would need to fall below $46.

More Like Gold’s Breakout Path

Hemke believes the current price pattern of silver is more similar to gold’s breakout process in 2023-2024, rather than the previous two silver bull markets.

In December 2023, gold broke through the strong resistance level of $2,000 and surged to $2,100, then experienced a sharp pullback. Only 17 days later, gold broke $2,100 again but fell back once more. In the following months, gold consolidated in the $2,000 range until March 2024, when it truly broke out and continued to rise.

At the time, many experts interpreted gold’s two retreats from $2,100 as a double-top and false breakout, but it turned out to be just a consolidation phase. In a September article last year, Hemke predicted that silver’s performance in the coming weeks would resemble gold’s behavior from late 2023 to early 2024—surging to historic highs of $48-$50, sharply pulling back, repeated failed breakout attempts, and eventually achieving a true breakout.

He expects silver’s real breakout to occur in early 2026. “Like gold two years ago, silver is consolidating and building a base near historical highs.” If a breakout happens next year, similar to gold’s doubling since March 2024, silver could hit $100 per ounce by mid-to-late 2027.

Structural Shortage Support

Fundamental data supports this technical analysis. The supply-demand dynamics remain extremely favorable for silver.

Many analysts believe that the shift of silver from London to New York last spring due to tariff concerns laid the groundwork for the record rally in October. As demand picked up, especially with increased Indian demand, traders scrambled for available metal. Silver quickly flowed back from New York to London, easing the tightness, but the underlying issue was not resolved.

The problem is not a lack of metal in London, but a global structural shortage of silver supply. Transfers between warehouses cannot fix this. According to Metals Focus, silver will see its fifth consecutive year of structural market deficit this year.

The agency projects this year’s supply gap will reach 95 million ounces, bringing the five-year cumulative deficit to 820 million ounces, equivalent to one year’s average mine output. Since 2010, the cumulative supply deficit in the silver market has exceeded 580 million ounces.

To fill the supply gap, silver users must draw on existing above-ground inventories, which usually requires higher prices to incentivize release. The fact that China’s inventory is near a ten-year low further confirms this tight supply situation. The Fed’s shift to easy monetary policy and expectations of rate cuts will continue to support silver prices in the coming year. Data on Thursday showed US jobless claims fell to a three-year low, but it did not shake the market’s bets on a rate cut next week.

Risk Warning and DisclaimerThe market has risks, and investment needs to be made cautiously. This article does not constitute personal investment advice, nor does it consider the special investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article suit their specific circumstances. Investment based on this is at your own risk. ```