Gold and silver extend the decline for the second session. What is causing the decline in precious metals?

Gold and silver prices fell sharply for a second day in a row on Thursday, driven by the expected annual rebalancing of major commodity indexes, which is expected to lead to widespread selling of precious metals futures.On the Multi Commodity Exchange (MCX), silver futures for March 2026 delivery fell by Rs 9,297 or 3.71% to Rs 2,41,308 per kg around 2:15 pm. Gold futures for February 2026 were also in the red, down Rs 1,069 or 0.77% to Rs 1,36,940 per 10 gram.

Internationally, COMEX silver fell nearly 3% to $75.32, while COMEX gold fell 0.7% to $4,431.10 an ounce.The sell-off comes ahead of the annual rebalancing of the Bloomberg Commodity Index, which takes place in the second week of January. During this period, index funds adjust their allocations to align with new weightings, a rules-based process that takes place once a year and aims to return the better-performing commodities to their target levels.

Because no commodity in these indices is allowed to weigh more than 15%, assets such as gold, silver and aluminum, which rose sharply in 2025, were under pressure. According to Bloomberg, Citigroup estimates that futures worth about $6.8 billion of silver and a similar value of gold could be sold by passive funds during the rebalancing exercise.

Silver, which is up over 150% through 2025, is seen as more vulnerable in the near term due to sharp price movements and recent investor enthusiasm.

According to Bloomberg, passive tracking funds will sell precious metals futures starting Thursday to meet the new weightings required by the indexes, a usually routine process that has taken on extra significance for gold and silver due to last year’s blistering rallies. The adjustment, which runs from January 9 to 15, could lead to the sale of not only silver and gold, but also aluminum.

Despite the current dip, gold and silver remain among the best-performing assets over the past year, supported by central bank buying, ETF inflows and safe-haven yields amid geopolitical uncertainty. However, in the short term, this rebalancing activity may keep prices under pressure.

Also read: Silver price falls by Rs 10,000 per day. Is the white metal’s rally in jeopardy?

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