I agree with the others that the gyrating is probably nothing. Little kids do things with abandon, and some of their gestures can often seem adult in a way. Like "dancing" by moving their hips, or the way they pull against a fence, or things like that. And while some kids don't really notice their privates, other kids are intrigued by what's hidden by their diaper. And some kids are allowed to watch music videos that show people dancing and will pick up movements that look very sexual on a child, even if the music video isn't really all that nasty. So I don't think the fact that the kid is naked or that he's gyrating/dancing/shaking the fence necessarily warrants the consideration that he's sexually precocious and perhaps being abused.
And I think part of the naked potty training is not just that it's easier for them to get to the potty and not have to take off clothes, but also that most kids dislike the feel of urine/stool on their bodies, and that it makes it easier for them to tell when it's coming--they feel a certain feeling, that feeling increases, then they feel a new sensation and look there's something coming out! They learn to recognize the first feeling as "I need to go" and that it leads to urination/a bowel movement. However, I think most of that process should be over within a few days, maybe a few weeks at most. By that point, they've gotten what they can from being naked. And as for learning to take off clothes, well, they should be dressed simply with clothes they can manage themselves, but they should be learning how to remove their clothes, it's part of the process. And if the kid is at least 3, really, he should be able to get what he can from the "naked potty training" and be able to handle clothes within a few weeks at most. If that's really what he was naked for, he's ready to move on. I think it's safe to say something to the parents. I wouldn't potty-train my kid that way, but I've heard of people who do. I really think that it should be contained to one weekend or so, and done with kids who are at the younger end of the potty-training scale. By the time your kid is 4, maybe even 3, nobody really wants to see them naked. Find another way to train them.