After the market closes on January 8th, which is tonight’s e...

After the market closes on January 8th, which is tonight’s early morning close, the Bloomberg Commodity Index will undergo its annual 'index rebalancing.'

Index rebalancing refers to funds that track certain indices or composite indices passively or mechanically buying and selling assets according to index rules. This action is primarily aimed at balancing the weightings within the index.

In simple terms, this kind of index rebalancing measures the assets covered by the index over the past year: reducing or selling those that have risen significantly in price, and increasing or buying those that have risen less.

The Bloomberg Commodity Index began its index rebalancing after the market close early Thursday and is expected to conclude by January 14. This rebalancing involves the sale of approximately $14 billion worth of gold and silver, which is anticipated to be completed within five trading days, with 20% of the sales executed each day.

This index rebalancing involves only futures contracts, not spot transactions. In the coming days, gold and silver will face technical selling pressure. However, this kind of rebalancing-related pressure does not necessarily indicate a disruption in the overall trend for gold and silver.

It is expected that the emotional volatility caused by this rebalancing will outweigh the actual selling pressure. A rough estimate suggests daily selling pressure of around $2.8 billion out of the total $28 billion. Based on this week's data, the average daily trading volume of gold futures contracts is about $8.5 billion, while that of silver is roughly $500 million.

In other words, the daily $2.8 billion selling pressure may only have a certain impact and create some resistance to gold price increases, but it could cause greater volatility risks for silver, which needs attention.

Additionally, several institutions have provided guidance, suggesting that mechanical selling pressure leading to price pullbacks represents a buying opportunity. However, given the current situation, the investment market might anticipate these moves ahead of the rebalancing, trying to outpace institutional adjustments, potentially causing significant fluctuations in gold and silver prices tonight.

Therefore, I believe that the emotional impact of this rebalancing will outweigh its actual effects, which should be noted.

Furthermore, following this Bloomberg Commodity Index rebalancing, alongside reducing gold and silver positions, there will be an increase in long positions for international crude oil by $3.6 billion, U.S. crude oil by $2.4 billion, cocoa by $2.2 billion, and sugar by $1.3 billion.

As participants in the venture capital market, facing the current release of precious metals liquidity, it remains uncertain whether we can benefit from potential liquidity dividends tonight!