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Silver recorded its biggest daily reversal in weeks. After rising more than 50% from the early February crash lows to reach $96 on March 2, XAG/USD has returned more than 14%.
The technical structure that has guided silver since February remains in place – but three signals that supported the rally have quietly reversed. Here’s what has changed, what has been, and what it means for the next path of silver.
The cup and handle pattern is still valid, and a hidden positive divergence has formed in the support area
Spot silver prices continue to trade in a cup with a handle pattern forming on the daily chart.
The neck of the cup is tilted upwards and passes through the area of ​​$96, the last local high. A daily close above this level will increase the odds of a breakout. Currently, the handle should be above $82, which was the lowest price in the shadow on March 3.
The structure supports a hidden bullish divergence that is forming on the Relative Strength Index (RSI), a momentum oscillator that tracks the speed of price changes. Between January 8 and March 3, silver prices recorded a higher low while the RSI recorded a lower low; This indicates a continuation signal which suggests that the underlying trend is still bullish despite the shallow correction.
The long tail lower on March 3, which touched $82 before pulling back to $86 (at press time), shows that buyers in XAG are defending this area. A daily close below $82 will currently negate the divergence, but keep the structure with higher lows intact. This structure will remain in place until the price remains above the level of January 8.
The structure says that the trend is high. But the structure alone does not move the prices – the capital. And three signals now go in the opposite direction.
The gold/silver ratio is in violation as the inverse postponement disappears
The gold-to-silver ratio (XAUXAG), which measures how many ounces of silver are needed to buy one ounce of gold, broke from the bullish flag that was… Warned as a risk in the analysis of February 21. The ratio rose sharply to nearly 64 on March 3, then fell to around 62.
The continuation of the move above 64 opens targets towards 67 and 70 – areas where gold prices are decidedly above silver, and the horizon of the cup and handle pattern is widened.
This change is not necessarily a flaw in the price structure of silver. Gold acts primarily as a store of value and a hedge against uncertainty, while around 60% of annual silver consumption comes from industrial applications. With rising geopolitical tensions, trade war fears and recession anxiety weighing on industrial sentiment, institutional capital is turning to the safe-haven appeal of gold at the expense of silver’s industrial sensitivities.
This shift is exacerbated by the disappearance of the backwardation condition on COMEX silver futures contracts (SI1!). A backwardation is a rare situation in which the spot price trades above the futures price, indicating that buyers are willing to pay a premium for immediate immediate delivery – indicating a real tight supply. By mid-February, the price of spot silver had a clear premium of $2 over SI1!
On March 3, this spread was closed close to zero, with spot and futures trading around $85 to $86.
The concern is aggravated after the open interest on SI1 has increased! briefly after March 2, but then stabilized and turned red – meaning that participation did not increase even when prices reached $96.
This is crucial because the backwardation was a signal that allowed silver to challenge the strength of the dollar in February. With the absence of that first spot and the cessation of participation in futures, the traditional inverse relationship resumes, and the dollar actually increases, as shown in Oil price analysis from our previous article.
The dollar index at 99 is the main obstacle, but the trader’s reports show possibilities
The US Dollar Index (DXY), which tracks the strength of the dollar, rose from 97 in mid-February to above 99. The index is now moving in a clear upward channel. Pressure is increasing towards the 1.618 Fibonacci extension near 100.50. Silver’s reversal from $96 to $83 coincides directly with this move. With the absence of backwardation as a barrier, silver has become completely exposed to the pressure of the dollar.
Look for the DXY to pull back towards 97 to 98 – the lower trend line of the channel – if you are a silver bull. This retraction will relieve the general stress and create the conditions for the completion of the formation of cup and button.
The positioning data, however, provides reasons for optimism in the medium term. The Commitments of Traders (COT) report published weekly by the Commodity Futures Trading Commission (CFTC) shows that managed funds — typically hedge funds and commodity trading advisors — held a net long position of about 8,500 contracts as of February 24 (the COT was last released). This has almost doubled from around 4,500 at the beginning of February, indicating an early re-entry of financial institutions.
But the context must be considered. Net long positions in managed funds peaked near 45,000 contracts in July 2025 and then declined by more than 80%.
He explained that at the 8,500 level, hedge funds had just re-entered. The spread between the current position and mid-2025 levels represents enormous purchasing power that could support a sustained rise in silver prices when a firm base is established. Total open interest continues to decline (compared to data released on February 17), confirming that the increase to $96 was mostly the result of short covering rather than new institutional buying. New long trades must be entered for the breakout to continue.
Target silver levels and prices to follow
Three of four signals from the February 21 analysis are weak – the default is removed, the dollar is strengthening, and the ratio of gold to silver is breaking. Only the technical structure remains steadfastly maintaining the upward trend.
The most likely scenario sees a consolidation between $82 and $90 in early to mid-March. Closing above $90 daily indicates that the cup with handle is moving higher. A daily close above the $96-$99 range confirms a cup and handle breakout. Therefore, the $100 area remains very pivotal, as it now acts as psychological and technical resistance ($99.01).
The future targets extend to $108, $115, and the total movement is measured from $129 to $135.
Identify $82 as the line of defense for silver Under this lineas closed below it eliminates the instantaneous deviation. Below this level, $71 is the next structural support – losing it invalidates the entire pattern.
The bullish scenario accelerates if the DXY declines towards 97 to 98, if the gold-silver ratio returns below 60, and COMEX reversals emerge. As long as at least two of these conditions are met, the path to $100 remains open. However, the market pushes the bulls to achieve this level.
