Gold and Silver Face Potential Price Pressure from January Index Rebalancing

Gold and silver markets may experience downward pressure in the coming weeks as major institutional investors adjust their holdings to reflect changes in widely tracked commodity indices. The annual rebalancing exercise, scheduled to take place between 9 and 15 January, could generate significant selling flows in precious metals whilst simultaneously directing capital towards energy commodities, particularly crude oil.

Deutsche Bank has highlighted that the Bloomberg Commodity Index rebalancing process is likely to trigger notable shifts in market positioning. The index serves as a benchmark for passive funds managing assets totalling approximately $109 billion, meaning even relatively modest adjustments to constituent weightings can produce substantial market movements.

Gold faces one of the largest reductions in the upcoming rebalancing. Its weighting within the index is scheduled to decline from 20.4% to 14.9%, primarily due to index methodology rules that impose a 15% cap on any single commodity to maintain diversification. Silver is subject to an even more pronounced cut, with its weighting set to fall from 9.6% to 3.9%.

According to Deutsche Bank’s estimates, index-linked selling could reach approximately 2.4 million troy ounces of gold. Based on historical price sensitivities, this volume of selling might exert downward pressure of between 2.5% and 3.0% on gold prices during the rebalancing period. The bank emphasises, however, that this relationship is not deterministic. Historical analysis reveals that large index weight changes have frequently coincided with price movements in the corresponding direction, though exceptions exist.

The 2025 rebalancing provides a pertinent example of how macro factors can override technical flows. Gold prices rose during that period despite a reduction in index weighting, demonstrating that broader influences such as interest rate expectations, currency movements and geopolitical developments can readily supersede mechanical selling pressure from index rebalancing.

Energy markets appear positioned to benefit from this year’s adjustments. Weightings for both Brent and West Texas Intermediate crude oil are scheduled to increase, alongside higher allocations to natural gas and gas oil. When adjusted for market liquidity conditions, Deutsche Bank’s analysis suggests that rebalancing demand is likely to be most pronounced for WTI crude oil, potentially making it a near-term beneficiary of the process.

Cocoa represents an unusual case within this year’s rebalancing. The commodity is being reintroduced to the index after satisfying liquidity and production thresholds. The implied buying volume represents a substantial proportion of existing open interest and daily trading volumes, creating the potential for sharp price volatility in what is already a highly unstable market.

For market participants, the implications relate primarily to timing rather than fundamental trend direction. Index rebalancing does not alter the long-term investment case for individual commodities, but it can generate temporary price distortions. Deutsche Bank views January as a period of heightened vulnerability for precious metals, whilst energy markets may experience a technical boost before market focus returns to underlying supply and demand fundamentals.

The rebalancing process serves as a reminder that commodity markets remain subject to substantial technical flows that can temporarily disconnect prices from fundamental valuations. Experienced investors should account for these periodic distortions when considering position timing, particularly in markets where passive fund flows constitute a significant proportion of overall trading activity.