Gold prices edged lower on Thursday, heading for a third consecutive session of losses, weighed down by a stronger U.S. dollar and investor caution ahead of futures selling linked to a commodity index reshuffle.
Spot gold (XAUUSD:CUR) fell 0.73% to $4,423.72 an ounce.
"Gold and silver face near-term volatility as annual index rebalancing triggers mechanical, price-insensitive futures selling following last year’s outsized gains," said Ole Hansen, head of commodity strategy at Saxo Bank.
Bank estimates suggest that combined selling of gold and silver futures could reach $6 billion–$7 billion in each metal during the rebalancing window.
"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," he added.
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...when concentrated into a short execution window, they can temporarily distort price action and liquidity—particularly in contracts with elevated speculative positioning, Hansen further noted.
Gold surged more than 60% last year, while silver (XAGUSD:CUR) 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 overexposed relative to target allocations."
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