Gold prices fell sharply on Thursday as investors prepared for major futures selling linked to annual commodity index rebalancing, while a firmer U.S. dollar made bullion more expensive for buyers using other currencies. Traders are also eyeing key U.S. economic data that could influence monetary policy and market sentiment.

Index Rebalancing Weighs on Precious Metals

The annual rebalancing of the Bloomberg Commodity Index, scheduled to run from January 8 to January 15, is prompting passive funds to adjust their holdings. Because gold and silver delivered unusually large gains in 2025, the indexes will reduce their target weightings of these metals. This requires funds that track the index to sell a large volume of gold and silver futures to meet new allocations.

Analysts estimate that the rebalancing could lead to billions of dollars in futures sales in the next few days, with Saxo Bank’s commodity strategist Ole Hansen suggesting $6 billion to $7 billion of selling pressure on COMEX gold and silver contracts.

This is not unique to gold; precious metals like silver and platinum are also experiencing volatility as traders square up positions ahead of the rebalancing period.

Price Movements and Market Context

As of late Thursday, spot gold was down around 0.6% to approximately $4,428 per ounce, while U.S. gold futures for February delivery also slipped by about 0.6%. Silver showed a larger decline, falling more than 3% to about $75.64 per ounce after reaching record highs just weeks earlier. Other precious metals like platinum and palladium also weakened.

The tightening U.S. dollar has compounded selling pressure because bullion becomes more expensive in currencies other than the dollar, reducing demand from overseas buyers.

Broader Economic Signals

The pullback in gold comes amid mixed U.S. labor market signals—data showed job openings fell to a 14‑month low in November—and as investors brace for Friday’s nonfarm payrolls report, which could offer fresh clues on the Federal Reserve’s interest rate outlook. Markets are currently pricing in the potential for two interest rate cuts this year, which historically supports precious metals, but near‑term volatility remains high.

Long‑Term Outlook Still Buoyant

Despite near‑term selling, some analysts remain optimistic over the longer horizon. HSBC recently forecast gold could reach $5,000 per ounce in the first half of 2026, driven by geopolitical risks and rising fiscal deficits, although a correction later in the year is possible. Silver, too, is expected to trade between $58 and $88 in 2026, supported by supply deficits and strong investment demand.

What to Watch

• Commodity index rebalancing window (Jan 8–15): Expect ongoing sales pressure on precious metal futures.
• U.S. payrolls data: Friday’s report could affect rate expectations and gold demand.
• Dollar strength: A stronger dollar can continue to blunt gold gains by making bullion pricier for non‑U.S. holders.