“[Bullish momentum has pushed gold prices to $4,500 an ounce, up nearly 4% since last Friday](https://l.ca-1.a.mimecastprotect.com/l?domain=kitco.com&t=AQICAHjJ4QQrUx4gohCUGeSPB2tMZWKAgC9xzOTGPFOeSLPFOQH026wDRiJ9U6GP_iI8SFRmAAAAzjCBywYJKoZIhvcNAQcGoIG9MIG6AgEAMIG0BgkqhkiG9w0BBwEwHgYJYIZIAWUDBAEuMBEEDGYDxG6KUg1zvKELrwIBEICBhlRbMhGX1cY-UG4UVIZ93rdpI9tPhNFyClwcUsBjBqiRoPwextvps9KnmfdG9wMwCQEU9JGOEB9GIrnI3AOGDj-WS8XLURodSCaNELsqC5OD2caDmzgQ3zbtdiYp6sj2zZrdlsO5PMCJf8GE2Y5TGx2OGvGpQhMhntH15ote69suqOrIox_7&r=/s/af-ZCj0Jyf1vGNKruWpXOMYugEErrxu3FOSIls), while silver is within striking distance of $80 an ounce and looking to end the week with a nearly 10% gain.“

“The resilience of silver has been particularly impressive as short-term downside risks have started to pile up in the marketplace. [The gray metal has bounced back from its sharp drop last week after the CME Group raised margin requirements to tamp down speculative momentum.](https://l.ca-1.a.mimecastprotect.com/l?domain=kitco.com&t=AQICAHjJ4QQrUx4gohCUGeSPB2tMZWKAgC9xzOTGPFOeSLPFOQH026wDRiJ9U6GP_iI8SFRmAAAAzjCBywYJKoZIhvcNAQcGoIG9MIG6AgEAMIG0BgkqhkiG9w0BBwEwHgYJYIZIAWUDBAEuMBEEDGYDxG6KUg1zvKELrwIBEICBhlRbMhGX1cY-UG4UVIZ93rdpI9tPhNFyClwcUsBjBqiRoPwextvps9KnmfdG9wMwCQEU9JGOEB9GIrnI3AOGDj-WS8XLURodSCaNELsqC5OD2caDmzgQ3zbtdiYp6sj2zZrdlsO5PMCJf8GE2Y5TGx2OGvGpQhMhntH15ote69suqOrIox_7&r=/s/5LDZC6BVkUlB0wjNfpDrk9jhZQQ00PiqhMa9Hi)  
  
Meanwhile, both gold and silver will be extremely sensitive to annual index rebalancing. Indexes like the Bloomberg Commodity Index (BCOM) and S&P GSCI Index hold a basket of commodities like oil, copper, wheat, and of course, gold and silver. An asset’s weighting in the basket can depend on various factors like liquidity or global production size. Gold represents about 14% of BCOM and 3% to 4% in the S&P GSCI. Silver represents about 9% of BCOM and 1.5% of GSCI.”  
  
Last year gold prices rallied more than 60% and silver prices rallied close to 150%, which increased their weighting — and now the positions have to be rebalanced. According to some estimates, commodity indexes have to sell roughly $5 billion in gold and silver to rebalance the weighting.  
  
However, the good news is that this rebalancing will be finished next week, and despite the downside risks, many analysts have said that the broader fundamentals supporting the metals remain firmly in place. For many analysts the play book that they were using last year remains relevant, which means dips will be bought fairly quickly.  
  
Index rebalancing may not make headlines, but it has a habit of reminding markets who is really in charge.  
  
Specifically for silver, it is difficult to see any significant downside as industrial consumption and investor demand continue to compete for dwindling supplies. No silver mine can be built in the next couple of months to alleviate the ongoing supply crunch — no matter how much the market might wish otherwise.“  
  


Gold and silver refuse to flinch  By Kitco News. “Although volatility has been elevated, both gold and silver have started the new year on solid footing as they look to end the week at critical resistance points.”