Many stock factors have relative and absolute scores that are slightly overbought, but near fair value. Market breadth is generally starting 2026 in a healthy position. Meanwhile, precious metals aren’t predicting economic collapse, writes Lance Roberts, editor of the Bull Bear Report.
With the S&P 500 Index (^SPX) above its key moving averages and within 100 points of a record high, the new year is kicking off on a bullish note. Developed and emerging markets are starting the year as the most overbought factors. Not surprisingly, gold miners, given the performance of precious metals, are also overbought but not as extreme as they were a few weeks ago.
The market is favoring high-beta stocks, while low-beta, mega-cap growth and the ARKK disruptive-technology factors are lagging. The effects of year-end 2025 trading and associated early 2026 activity will continue to affect the market for a few more days. Still, the more rapid rotations among factors and sectors should ease, and the market’s tone should become clearer.
As for metals like silver? Pricing for all commodities, and particularly precious metals, is ultimately determined in the futures markets. These markets primarily function through the COMEX and CME.
In the long term, physical demand indeed affects prices. However, in the short term, prices are set by futures contracts where buyers and sellers speculate, hedge, or arbitrage for profit. Given that the vast majority of these contracts are cash-settled (meaning they don’t result in physical delivery), the price is set more by the volume and positioning of financial participants than by immediate physical demand or scarcity.
This structure allows large institutions, hedge funds, and algorithmic traders to influence price direction through leverage, often independent of underlying physical flows. As a result, even substantial physical shortages or premiums in retail markets may not reflect directly in futures-based spot prices unless accompanied by shifts in futures market positioning.
