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Gold and silver prices declined for a second straight session as traders positioned for annual commodity index rebalancing, which is expected to trigger heavy futures selling. Silver faces sharper downside pressure, with estimates suggesting nearly $6.8 billion worth of contracts could be sold. Gold has also seen outflows, though analysts remain structurally bullish on the metal amid strong central-bank buying, geopolitical risks, and expectations of US rate cuts. While index-related selling may weigh on prices in the short term, the broader outlook for precious metals, especially gold, remains supportive over the medium to long term.

Key Highlights

* Gold and silver fell ahead of annual commodity index rebalancing

* Around $6.8 billion silver futures selling expected

* Gold outflows also likely due to higher index weightings

* Central bank buying continues to support bullion prices

Gold and silver prices weakened for a second consecutive session as market participants positioned for the annual rebalancing of major commodity indexes, a process expected to unleash billions of dollars’ worth of futures selling in the coming days. The anticipated supply of paper contracts has created near-term pressure on precious metals prices despite a broadly supportive macro backdrop.

Spot gold slipped below the $4,450 per ounce mark, while silver declined sharply, losing over 3 per cent in the latest session. Passive funds tracking benchmarks such as the Bloomberg Commodity Index and the S&P Goldman Sachs Commodity Index are adjusting their holdings to align with revised weightings following last year’s strong rally in precious metals. As a result, futures contracts are being sold over a defined roll period, amplifying short-term volatility.

Silver appears particularly vulnerable, with Citigroup estimating that around $6.8 billion worth of silver futures could be sold, equivalent to roughly 12 per cent of open interest on Comex.

Despite near-term weakness, the broader outlook for gold remains constructive. Analysts continue to highlight strong central-bank demand, ongoing geopolitical risks, and expectations of US interest-rate cuts as key drivers supporting prices. Gold delivered its strongest annual performance since 1979 last year, aided by a weaker US dollar and steady inflows into bullion-backed exchange-traded funds.

Silver’s longer-term fundamentals also remain supportive, underpinned by tight physical supply and robust industrial demand. However, the index-driven selling could temporarily cap upside momentum. Market participants are now awaiting key US economic data, particularly the December jobs report, which could influence Federal Reserve policy expectations and near-term precious metals sentiment.

While index rebalancing may pressure gold and silver prices in the short term, strong fundamentals and macro tailwinds suggest the broader bullish trend remains intact beyond the current adjustment phase.

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