Gold Steadies as Traders Await Commodity Index Rebalancing, Data

Gold steadied near $4,460 an ounce on Thursday as traders anticipated a significant wave of index-driven selling in the coming days. Prices had fallen nearly 1% the previous session, reflecting market caution ahead of the Bloomberg Commodity Index (BCOM) rebalancing. Analysts expect gold to face pressure as the index adjusts its allocations to align with predefined targets.

The BCOM rebalancing window runs from January 9 to January 15. During this five-day period, the index will reduce the weighting of outperforming commodities, including gold, which is being cut from 20.4% to 14.9%. This adjustment, driven by index rules that cap exposure to any single commodity, is expected to trigger selling activity in gold and silver.

Outflows from gold and silver futures are estimated at roughly $6.8 billion each, according to Citigroup. This means the combined notional selling pressure could exceed $14 billion during the rebalancing period. Such flows are expected to affect liquidity and short-term price movements.

Commodities like crude oil, natural gas, and cocoa are set to benefit from the rebalancing. These assets are expected to receive additional index allocations as the rebalancing shifts funds from outperforming commodities to underperforming ones.

Why Did This Happen?

The rebalancing is a technical process designed to maintain diversification within the index. By capping any single commodity at 15%, the BCOM aims to prevent excessive concentration. As gold's price surged in 2025, the index needed to reallocate to stay within its predefined limits.

Deutsche Bank analyst Michael Hsueh noted that gold and silver are among the commodities expected to face the largest outflows. Hsueh estimates that the expected selling could lead to a 2.5% to 3.0% decline in gold prices, depending on the calculation method.

How Did Markets React?

Traders are also closely watching U.S. economic data, including the December jobs report scheduled for Friday. A softer-than-expected report could support rate-cut expectations, which are generally bullish for gold and silver.

Gold edged up 0.1% to $4,460.96 an ounce on Thursday as of 7:32 a.m. Singapore time, while silver rose 0.6% to $78.62, recovering from a 4% drop the previous day.

What Are Analysts Watching Next?

Index rebalancing does not always move prices in a consistent direction. Between 2021 and 2024, large weighting changes generally aligned with price trends, but 2025 was an exception. Gold prices rose despite a reduction in its index weight, suggesting that fundamentals can sometimes override technical flows.

Ole Hansen of Saxo noted that gold and silver remain well-supported by strong investment demand and supply constraints. Despite short-term volatility from rebalancing, the broader investment narrative remains intact, driven by macroeconomic and geopolitical factors.

Traders are also monitoring the U.S. dollar, which has risen to a two-week high. A strong dollar makes greenback-denominated commodities more expensive for buyers using other currencies.

The Fed is expected to keep interest rates unchanged at its January 27-28 meeting. However, markets are pricing in at least two rate cuts this year, which could provide further support for gold and silver.

Gold is currently trading near $4,500, with the 50-period and 100-period moving averages providing some support. A break below $4,450 could expose further downside, while a move above $4,500 would signal continuation of the bullish trend.