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Gold and silver face $11 billion sell-off from index rebalancing
Gold and silver prices ended mixed on Friday after a strong start to the year, as traders braced for substantial selling pressure from the annual rebalancing of the Bloomberg Commodity Index set to begin next week. Gold settled at $4,332.88 per ounce, up 0.33 percent, while silver closed at $72.80, gaining 1.66 percent. Both metals delivered their best annual performances since 1979 in 2025, with gold rising 65 percent and silver surging over 144 percent, though a technical headwind now tests those recent advances.
Starting January 8, passive funds tracking the Bloomberg Commodity Index, which manages nearly $109 billion in assets, will offload around $6 billion in gold futures contracts and more than $5 billion in silver futures over a five-day rollover period through January 14. These adjustments align the index's weightings with production and trading volume data.
Daniel Ghali, senior commodity strategist at TD Securities, warned in a note that about 13 percent of total open interest in Comex silver markets could be sold over the next two weeks, sparking a sharp downward revaluation. He cautioned that post-holiday thin liquidity might heighten price swings. JPMorgan Chase analysts, in a December 12 report, pegged the sales at roughly 9 percent of silver's total futures open interest and 3 percent for gold, noting this year's silver pressure exceeds last year's.
Even with short-term technical strains, major investment banks hold bullish long-term outlooks for precious metals in 2026. Goldman Sachs forecasts gold reaching $4,900 per ounce by year-end, driven by steady central bank purchases and rising inflows into Western exchange-traded funds. JPMorgan sees gold topping $5,000 in the fourth quarter.
Optimism draws support from anticipated further Federal Reserve rate cuts, which lower the opportunity cost of holding non-yielding assets like gold. Central banks, especially in emerging markets, have quintupled gold buys since 2022 as part of broader diversification away from dollar-denominated reserves. KCM Trade chief market analyst Tim Waterer suggested precious metals could mirror 2025's path this year, carrying forward momentum, though investors will watch if index-driven sales disrupt January's traditionally favorable seasonal trend for these assets.
