Gold and silver prices fell sharply for the second day

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Gold and silver prices continued to slide for the second consecutive session on Thursday, as markets reacted to expectations of the annual rebalancing of major global commodity indexes. The anticipated reshuffle is expected to trigger sizeable selling of precious metal futures, prompting investors and traders to pare exposure ahead of the event.

On the Multi Commodity Exchange (MCX), precious metals witnessed sharp pressure. Silver futures for March 2026 delivery tanked Rs 9,297, or 3.71%, to Rs 2,41,308 per kg by around 2:15 pm, marking one of the steepest single-day declines in recent sessions. Gold futures for February 2026 delivery were also in the red, slipping Rs 1,069, or 0.77%, to Rs 1,36,940 per 10 grams.

The ongoing decline is largely attributed to expectations that commodity index–tracking funds will reduce their allocations to gold and silver during their annual rebalancing exercise. These indexes, followed by large institutional investors and passive funds, periodically adjust their weightings based on set parameters such as production trends, liquidity, and price performance. Given the scale of assets linked to these benchmarks, even rule-based portfolio adjustments can result in heavy selling pressure in futures markets.

Traders have also been proactively unwinding long positions, fearing that index-related selling could intensify volatility and push prices lower in the near term. This pre-emptive positioning has amplified the downside move, despite the absence of any major deterioration in underlying demand fundamentals.

Further weighing on precious metals sentiment is the strength in the U.S. dollar and cautious expectations around global interest rate trajectories. Higher bond yields tend to reduce the attractiveness of non-yielding assets such as gold and silver, encouraging investors to shift funds toward yield-generating instruments. This macro backdrop has limited buying interest at lower levels so far.

However, market analysts caution that the current decline appears to be largely technical and event-driven rather than fundamentally bearish. Historically, selling linked to index rebalancing tends to be short-lived, with prices often stabilizing once the adjustment process is completed. Physical demand, central bank purchases, and geopolitical uncertainties are expected to continue offering longer-term support to gold, while silver may find demand from industrial and green energy sectors over time.

Going ahead, market participants will closely monitor the pace and extent of index-related fund flows, along with global economic data and currency movements, to assess whether the current weakness extends further or gives way to consolidation at lower levels.