Silver continued its downward slide on Thursday as investors prepared for the rebalancing of commodity indexes and took profits from the metal, which has seen its value more than double in the past year.
Spot prices dropped 5% to $73.91 per ounce before recovering slightly. This marks a 4% decrease since the last session after briefly surpassing $80 an ounce earlier this week.
In contrast, gold remained stable, managing to recover from an initial 1% dip in early trading.
Index rebalancing
Investors are on edge regarding the annual rebalancing of commodity indexes. This process will necessitate funds to offload billions of dollars’ worth of precious metals futures contracts in the upcoming days.
Citigroup anticipates that around $6.8 billion in silver futures will need to be sold, which accounts for roughly 12% of Comex’s open interest. The expected outflows from gold futures are projected to be similar.
Both silver and gold faced declines last year but didn’t significantly impact the market, as noted in a December report by JPMorgan Chase & Co. However, the bank mentioned that this year, the amount of silver needing to be sold will likely be greater.
When compared to gold, silver tends to be more affected by index rebalancing and thus displays more volatility. On Wednesday, silver-backed ETFs experienced their largest single-day outflows since October, according to exchange data.
“I’ve been observing this for many years, and I’ve never encountered a situation like this,” commented Kenny Hu, a strategist at Citi.
Generally bullish
Despite the recent two-day downturn, analysts maintain a generally positive outlook for the precious metal. This optimism stems from increasing geopolitical risks, including rising trade tensions between China and Japan, along with the U.S. detention of Venezuelan leader Nicolas Maduro.
Gold is on track to achieve its best annual performance since 1979, having reached new all-time highs 50 times through 2025. This surge has been fueled by central bank purchases and investments in ETFs. Additionally, the weakening of the U.S. dollar has contributed to higher prices, making gold more accessible to buyers using other currencies.
“The current rally is being driven by a strong mix of safe-haven and risk-off buying, partly due to a weak dollar and ongoing policy uncertainty,” stated James Steele, chief precious metals analyst at HSBC, who predicts that gold prices could reach $5,000 an ounce in the first half of 2026, influenced by rising geopolitical tensions and growing fiscal debt.
Silver’s performance has been even more remarkable than gold’s, having surged 150%. This increase followed a significant short squeeze in the market last October, leading to unprecedented price levels towards the end of the year.
