Gold and silver fell for a second day, with investors positioning for an annual rebalancing of commodity indexes that will see futures contracts worth billions of dollars sold in the next few days.

Spot gold slipped below $4,450 an ounce, after losing nearly 1 per cent in the previous session. Passive tracking funds are selling precious metals futures from Thursday to match new weightings required by the indexes — a routine process that has taken on extra significance for gold and silver due to last year’s blistering rallies, a Blommberg report said.

Silver – which fell over 3 per cent on Thursday — is particularly vulnerable to a sharp selloff. Citigroup Inc estimated that about $6.8 billion in silver futures could be sold to meet the rebalancing requirements, equivalent to about 12 per cent of open interest on Comex.

Outflows from gold futures will total roughly the same amount, according to Citi, basing its estimate on funds tracking the Bloomberg Commodity Index and the S&P Goldman Sachs Commodity Index. The rebalancing is needed because of the sharp rise in the weighting of precious metals in commodity benchmarks.

The Bloomberg Commodities Index roll period runs from the sixth business day of the year to the tenth, but is typically at a one-day lag to the trading done to rebalance the index, which is usually evenly spread across the fifth business day to the ninth.

Both metals faced a similar index selloff last year, without causing a discernible drag on the market, according to a December 2 note from JPMorgan Chase & Co.