Gold and Silver Slip as Commodity Index Rebalancing Looms

Gold and silver edged lower as markets braced for the annual rebalancing of major commodity indexes, a rules-based adjustment that can trigger heavy selling of futures contracts to realign allocations. The move comes after a strong rally in both metals last year, which boosted their weightings in indexes such as the Bloomberg Commodity Index.

Spot gold slipped below $4,420 an ounce, following a nearly 1% decline in the previous session, while silver, more volatile after its outsized gains, fell sharply as traders anticipated mechanical selling pressure from index-tracking funds. According to analysts, the rebalancing process, which typically runs in early January, could see billions of dollars’ worth of gold and silver futures sold to meet new target weights.

The expected selling stems from rules governing benchmarks like the Bloomberg index, which annually adjust commodity weightings based on relative performance — a process distinct from broader market demand and often independent of near-term economic signals. Some estimates suggest significant outflows from gold and silver as a result of this technical adjustment, potentially putting temporary downward pressure on prices.

Despite the short-term headwinds, longer-term fundamentals remain supportive. Precious metals enjoyed their strongest annual rallies since 1979, bolstered by central bank purchases, inflows to bullion-backed ETFs, and heightened geopolitical tensions that have enhanced gold’s safe-haven appeal. Traders are also watching upcoming U.S. jobs data, which could influence monetary policy expectations and further sway demand for non-yielding assets like gold and silver. 

At 1:40 p.m. Singapore time, gold was down about 0.7% at $4,424.54 an ounce, while silver fell around 2.7% to $76.07, reflecting the cautious sentiment ahead of index adjustments and macroeconomic releases. While rebalancing flows may dampen prices in the short run, strategists note that technical selling does not necessarily signal a breakdown in the metals’ broader uptrend. In a market still driven by structural demand and global uncertainties, the near-term price action could simply reflect mechanical repositioning rather than a shift in the long-term investment thesis for precious metals.