Precious metals kicked off the new year with strong gains, as gold and silver continued their impressive momentum from a record-setting 2025. The early rally on January 2nd, however, faces a significant near-term test from a looming, large-scale rebalancing of a major commodity index that could force the sale of billions of dollars in holdings.
Strong Start Meets Potential Headwind
In the first trading session of 2026, gold rose as much as 1.9% before paring some gains during U.S. market hours. Silver demonstrated even greater strength, climbing 1.9% after an initial jump of up to 4%. This positive opening built upon the metals' best annual performances since 1979, a year marked by historic rallies.
While the fundamental backdrop for 2026 appears supportive—with expectations of further U.S. interest rate cuts and potential dollar weakness—traders are closely watching a technical factor that could temporarily reverse the trend. A broad rebalancing of the widely tracked Bloomberg Commodities Index (BCOM) is set to begin, necessitating substantial sales to align with new target weightings.
The Impending Index Rebalancing Sell-Off
The mechanics of the index shift are poised to create significant selling pressure. Silver futures currently represent about 9% of the BCOM index, but the target weighting for 2026 is set at just under 4%. This discrepancy means that over US$5 billion worth of silver holdings must be sold during a five-day adjustment period starting January 8th. Similarly, roughly US$6 billion in gold futures are slated for sale.
Daniel Ghali, a senior commodity strategist at TD Securities, highlighted the scale of the impending move in a note. "We expect a massive 13% of aggregate open interest in Comex silver markets will be sold over the coming two weeks, to result in a dramatic repricing lower," he wrote. He added that lower post-holiday liquidity could amplify the price moves.
Recapping a Historic 2025 Rally
The current context follows an extraordinary year for precious metals. Gold achieved a series of all-time highs in 2025, driven by robust central bank purchases, a shift toward easier monetary policy by the Federal Reserve, and a softer U.S. dollar. Geopolitical tensions and trade frictions also bolstered demand for safe-haven assets.
Silver outperformed even gold during the year, shattering records and surpassing levels many analysts had considered unlikely. In addition to sharing gold's tailwinds, silver benefited from persistent market concerns that the U.S. administration might eventually impose import tariffs on the refined metal.
The rally was not without volatility, however, as late December saw significant price swings. Some investors moved to lock in profits, and technical indicators pointed to overbought conditions, leading to a pullback.
Despite the near-term headwind from index rebalancing, the outlook among major financial institutions remains broadly positive for the year. Goldman Sachs Group Inc. stated last month that its base case was for gold to rally to US$4,900 an ounce, with risks skewed to the upside. This optimism is partly underpinned by expectations of additional Fed rate cuts and changes to the U.S. central bank's leadership under President Donald Trump.
By the close of trading on January 2nd, gold was up 0.5% at US$4,341.46 an ounce, while silver held its 1.9% gain at US$72.99 an ounce. Palladium and platinum also traded higher. Trading volumes were subdued, with several major Asian markets, including Japan and China, still closed for holidays.
