Nifty Metal tumble explained: Is this just a correction or the start of a deeper fall?

Global commodity markets are witnessing sharp volatility as the annual rebalancing of major commodity indices triggers large-scale fund reallocations in precious, energy and industrial metals, said Mohammed Imran, Commodity Analyst at Mirae Asset Sharekhan.Speaking on ET Now’s Commodity Central, Imran said precious metals have already entered a corrective phase, with further downtrend likely due to mean reversal in index weights. At the beginning of 2025, gold and silver together accounted for about 18.8% of the Bloomberg Commodity Index, but by the end of the year their combined weight rose to almost 30%. This excess weight is expected to be reduced through a rebalancing, potentially causing a 12% sell-off in precious metals.

“Silver could see sharper pressure compared to gold,” Imran noted, adding that Comex silver could test support levels near $70. He estimated global futures outflows at more than $6 billion as part of the rebalancing exercise towards 2026.

Brent crude is likely to benefit from index rebalancing

The energy basket, on the other hand, could see a selective inflow. While the index has reduced exposure to US benchmarks such as WTI oil and natural gas, the weighting of Brent crude has been increased to around 8.36% from 8.03% last year. This shift could support Brent prices, with Imran expecting a potential move towards $62 per barrel in the near term.

Copper faces a short-term correction, while the long-term supply crunch remains intact

Copper, which has risen more than 40% since the start of 2025, may also see some correction in the near term due to index adjustments, even though its weight in the commodity index is expected to rise to 6.36% in 2026. Imran expects prices to cool towards the 13,000 level in the coming weeks.

Structurally, however, the copper market remains tight. Global estimates of the refined copper shortage have been sharply revised upwards, from previous forecasts of 200,000 to 300,000 tonnes, to 500,000 to 600,000 tonnes. A major cause of this is the long-term disruption of the Grasberg mine, which accounts for almost 3% of global copper production and is unlikely to return to full capacity before the end of 2027.

Outlook for aluminum positive, zinc faces downside risk

Among other industrial metals, aluminum appears better positioned for 2026. While China has largely limited production to around 45 million tonnes, new capacity expansions in Indonesia could boost supply by 500,000 to 600,000 tonnes this year. Still, replacement demand with expensive copper and steady global consumption could push aluminum into a shortage of 200,000 to 300,000 tons next year. Zinc, on the other hand, can come under pressure. After the recent tightness in Europe pushed prices downward, rising Chinese exports have eased supply concerns. With the market in contango, Imran expects zinc prices to fall towards 2,900 in the coming months.

Overall, analysts warn that short-term volatility due to technical rebalancing may persist, but underlying supply-demand dynamics will remain the main driver of commodity prices in 2026.