XAG/USD Soars: Silver Price Skyrockets Past $90 as Supply Fears Spark Stunning Rally

Global silver markets witnessed a stunning surge on Thursday, with the XAG/USD pair breaking decisively above the critical $90 per ounce threshold. This remarkable rally, driven by a potent combination of receding geopolitical fears and deepening concerns over structural supply shortages, marks one of the most significant moves in the precious metal complex this year. Consequently, analysts are now reassessing their medium-term forecasts for the white metal.

XAG/USD Breaks Key Resistance Amid Shifting Market Sentiment

The recent price action for silver has been nothing short of dramatic. After consolidating for several weeks below the $85 level, the XAG/USD pair found explosive momentum. Market data from major exchanges shows that the breakout was accompanied by a substantial increase in trading volume, indicating strong conviction among institutional buyers. Furthermore, this move represents a year-to-date gain of over 25%, significantly outpacing the performance of its sister metal, gold.

Several immediate catalysts contributed to this surge. Primarily, statements from key global trade officials suggested a de-escalation in the protracted tariff disputes that have weighed on industrial demand forecasts. Since silver has substantial industrial applications, accounting for roughly half of its annual consumption, any relief in trade tensions provides a direct boost to its fundamental outlook. Simultaneously, technical analysts noted that the breach of the $88.50 resistance level triggered a cascade of algorithmic buying, accelerating the upward move.

The Critical Role of Industrial Demand

Silver’s unique dual role as both a monetary and industrial metal makes its price particularly sensitive to macroeconomic shifts. The photovoltaic sector, a major consumer for silver in solar panel production, has reported stronger-than-expected order books for 2025. Similarly, demand from the electronics industry remains robust. This resilient industrial base provides a solid floor for prices, even during periods of financial market volatility.

Structural Supply Deficit Fuels the Sustained Rally

Beyond short-term sentiment, a more profound structural issue is underpinning the bullish case for silver: a persistent and growing supply deficit. According to the latest industry report from the Silver Institute, the global market has been in a supply deficit for four consecutive years. Mine production has plateaued due to declining ore grades and a lack of major new discoveries, while secondary recycling has failed to keep pace with soaring demand.

The following table illustrates the key supply-demand dynamics for the past three years (figures in million ounces):

This consistent shortfall means that above-ground inventories, particularly those held in exchange-traded funds (ETFs) and vaults, are being drawn down. As visible stockpiles shrink, the market becomes more vulnerable to price spikes from any unexpected surge in buying activity. Key factors exacerbating the supply crunch include:

• Stagnant Primary Production: Major mining jurisdictions face increasing regulatory and environmental hurdles.
• By-Product Dependence: Over 70% of silver is mined as a by-product of zinc, lead, and copper, tying its output to the economics of other metals.
• Investment Demand Resilience: Physical bar and coin demand remains elevated as investors seek tangible assets.

Expert Analysis on the Macroeconomic Backdrop

Financial experts point to a broader macroeconomic environment that is becoming increasingly favorable for precious metals. While tariff fears have tempered, underlying concerns about currency debasement and long-term inflationary pressures persist. Many central banks, particularly in emerging economies, continue to diversify their reserves, adding both gold and silver. This official sector demand provides a layer of price support often absent in other commodities.

Moreover, the historical gold-to-silver ratio, which recently traded near 80 ounces of silver to buy one ounce of gold, remains high by long-term standards. Historically, this ratio has mean-reverted closer to 60, suggesting silver has significant catch-up potential if investor appetite for precious metals broadens. Market strategists note that a rotation from overvalued equity sectors into hard assets could provide the next leg higher for the XAG/USD pair.

Risk Factors and Market Volatility

Despite the bullish narrative, traders are advised to consider inherent risks. Silver is known for its high volatility compared to other major assets. Sharp corrections can occur, especially if the U.S. dollar experiences a sudden strengthening phase or if risk appetite in equity markets recovers dramatically. Therefore, position sizing and risk management remain paramount for participants in the silver futures and spot markets.

Conclusion

The surge in the XAG/USD pair above $90 represents a confluence of technical breakout and strengthening fundamentals. The easing of immediate tariff tensions has removed a significant overhang on industrial demand, while the relentless structural supply deficit continues to tighten the physical market. For investors and market observers, the silver price action serves as a critical barometer of both industrial health and monetary anxiety. Moving forward, the sustainability of this rally will depend on the persistence of investment inflows and tangible evidence that mine supply cannot easily respond to these higher price signals. The white metal’s journey is a compelling story of market dynamics in action.

FAQs

Q1: What does XAG/USD mean?
XAG is the ISO 4217 currency code for silver, and XAG/USD represents the price of one troy ounce of silver quoted in U.S. dollars. It is the standard forex pair for trading silver.

Q2: Why is a supply deficit so important for the silver price?
Unlike financial assets, physical commodities like silver cannot be created arbitrarily. A persistent deficit, where demand exceeds new supply, must be met by drawing down existing inventories. As these stockpiles fall, the market becomes tighter, increasing the price sensitivity to any new demand.

Q3: How much of silver demand is industrial versus investment?
Approximately 50-55% of annual silver demand comes from industrial applications, including electronics, solar panels, and brazing alloys. The remainder comes from jewelry, silverware, and physical investment in bars, coins, and ETFs.

Q4: What is the gold-to-silver ratio and why does it matter?
The ratio indicates how many ounces of silver it takes to purchase one ounce of gold. A high ratio (e.g., 80:1) suggests silver may be undervalued relative to gold, based on historical averages. Traders watch this for potential mean-reversion trades.

Q5: What are the main risks to the current silver price rally?
Key risks include a sharp rise in the U.S. Dollar Index (DXY), a significant slowdown in global industrial production, a sudden wave of profit-taking from large speculative positions, or an unexpected increase in mine supply or recycling rates.