Precious metals continue to adjust! Silver falls more than 3%, gold declines, major commodity index rebalancing starts today.

The precious metals market is undergoing a liquidity shock triggered by index rebalancing.

On January 8, the precious metals market saw another round of collective adjustment as spot gold plunged, dropping to a low near $4,415. COMEX silver futures fell over 2%, spot silver dropped more than 3%, hitting a low of $75.58. Additionally, platinum, palladium, and copper also declined.

(Spot Gold 30-Minute Chart)

(Spot Silver 30-Minute Chart)

(New York Platinum 30-Minute Chart)

(New York Palladium 30-Minute Chart)

(LME Copper Futures 30-Minute Chart)

This round of adjustment in the precious metals market is directly related to the annual rebalancing of the Bloomberg Commodity Index (BCOM), a mechanism that started after market close on January 8 and will last until the 14th. The adjustment reduces gold’s weighting from 20.4% to 14.9% and silver’s weighting from 9.6% sharply down to 3.94%, forcing passive funds tracking the index to mechanically adjust their positions.

Deutsche Bank and TD Securities estimate that $7.7 billion worth of silver selling orders will flood the market over the next two weeks, equivalent to 13% of total open interest in the COMEX silver market. Market analysis shows that this rebalancing will result in futures selling accounting for 9% and 3% of the total positions in silver and gold, respectively.

It is worth noting, according to a WallstreetCN article, the decline in gold, silver, and other precious metals comes after an unprecedented, epic rally. Spot gold’s cumulative gain for all of 2025 exceeded 70%, and silver’s annual gain once reached about 150%, setting consecutive all-time highs since entering a surge mode on December 23 last year. Such huge short-term profits have left the market extremely vulnerable when facing a liquidity event.

Index Rebalancing Triggers Large-Scale Technical Selling

The Bloomberg Commodity Index uses an annual rebalancing mechanism, with weights calculated based on two-thirds trading volume and one-third global production, setting weight limits at the commodity, sector, and group levels. According to index rules, the weighting of a single commodity cannot exceed 15%, maintaining diversification.

According to a WallstreetCN article, Deutsche Bank analyst Michael Hsueh pointed out that "it’s negative for precious metals and positive for crude oil." Based on open interest scale, silver will bear the greatest rebalancing selling pressure, followed by aluminum and gold.

Michael Hsueh estimates that 2.4 million ounces of gold selling could lead to a price drop of 2.5%-3.0%, depending on the sensitivity model used for ETFs and the time window.

TD Securities analyst Daniel Ghali warned in a December 31 report that trading volume for the largest silver ETF has reached extreme levels only seen at historical market peaks, while its premium is at historical highs, reflecting retail investors’ speculative frenzy.

He believes the recent silver spike "resembles a blowout arbitrage trade, and next will be a sharp repricing commonly seen in commodity cycles throughout history."

Ghali stresses that since November, silver’s "devilish blow-off top" has not reflected demand, supply, or fundamentals.

He expects that 13% of open interest in the COMEX silver market will be sold over the next two weeks, leading to substantial repricing under ongoing liquidity vacuum. This selling of $7.7 billion and associated trading volume will stem from broad commodity index rebalancing, with volumes potentially far surpassing previous extremes seen in the largest silver ETF.

Risk Disclosure and DisclaimerThe market carries risks; investments should be made cautiously. This article does not constitute personal investment advice, nor does it take into account individual users’ specific investment objectives, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article align with their particular circumstances. Investments made accordingly are at one’s own risk.