Gold and silver face a test of strength as annual index rebalancing begins

Key takeaways:

• Gold and silver face near-term volatility as annual index rebalancing triggers mechanical, price-insensitive futures selling following last year’s outsized gains
• Estimated rebalancing flows are large in notional terms, but concentrated in paper markets and do not reflect a deterioration in underlying fundamentals
• How prices behave during the five-day rebalancing window will be an important signal of whether recent gains were momentum-driven or supported by deeper demand

Gold and silver enter the second week of January facing a familiar but often misunderstood near-term headwind: the annual rebalancing of major commodity indices such as the S&P GSCI and the Bloomberg Commodity Index. This once-yearly, rules-based process runs over five business days starting today and during this time index-tracking funds realign their futures exposure back to predefined target weights after a year of uneven price performance.

In years with modest dispersion across commodities, the rebalancing is usually a low-key affair. After 2025, however, it is anything but. Gold surged more than 60% last year, while silver delivered its strongest annual performance since 1979 with gains close to 150%. Additional gains into early 2026 further inflated their index weights, leaving passive funds mechanically over-exposed relative to target allocations.

What rebalancing actually means in practice

As gold and silver outperformed, their weightings within commodity benchmarks rose automatically. Rebalancing reverses this drift. Index providers reset weights using pre-defined rules based on liquidity and production data, and index-tracking funds are then required to sell futures in commodities that have become overweight and reallocate toward those that lagged.

Crucially, these flows are price-insensitive. They are not a judgement on fundamentals, valuation or macro outlook, but a mechanical consequence of index construction. Even so, when concentrated into a short execution window, they can temporarily distort price action and liquidity—particularly in contracts with elevated speculative positioning.

Why gold and silver stand out this year

Following last year’s exceptional performance, precious metals will have to absorb some of the largest notional rebalancing flows across the commodity complex. Bank estimates suggest that combined selling of gold and silver futures could reach USD 6–7 billion in each metal during the rebalancing window.

Silver stands out in relative terms. Estimates indicate potential selling equivalent to around 10–12% of average daily turnover, or roughly low-double-digit percentages of COMEX open interest. These are large numbers in headline terms and explain why silver has already experienced sharp two-day declines of around 8%, with gold also coming under pressure.

That said, context matters. The recent sell-off has so far unwound only about half of silver’s early-January gains, suggesting that dip-buyers remain active and that selling pressure has, at least initially, been absorbed rather than cascaded. It is also worth noting that platinum is not included in these indices and, while it is not exposed to rebalancing-related selling, price action may still be influenced by broader sentiment spilling over from gold and silver.