Gold and silver prices took a hit on Tuesday.
Gold has fallen for the eighth of nine sessions, hurt by a firm dollar and persistent outflows from exchange-traded funds, pointing to more downside pressure on the metal, which has already lost about a fifth of its value this year.
Gold was hit by a shift in investments into higher-yielding equities as fears grew that the US Federal Reserve could soon end its bullion-friendly bond buying programme.
Silver, which largely held its ground during the sell-off in precious metals last month, appeared to be the next target for sellers.
Spot silver fell as much as 2.2% on Tuesday to trade near two and a half year-year lows reached during the 6% slide in the previous session.
Gold fell 0.3% to $1 388.36 an ounce by 4.37am GMT. That was within striking distance of the two-year low of $1 321.35 touched on April 16.
"We can still see some selling pressure this morning. We don't see too much physical demand from the market," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong, on Tuesday.
Gold gained 2.6% on Monday after a seven-session slide that was its longest losing streak since March 2009.
Higher interest rates
Expectation that the US central bank may soon stop its monthly $85-billion bond purchases given recent improvements in the US job market also limited gold's draw as an inflation hedge.
"Should [Federal Reserve Bank chair Ben] Bernanke encourage perceptions that the [bank] could move somewhat earlier than expected, gold could get hurt as a change in stance may finally usher in higher interest rates," said Edward Meir, a metals analyst at futures brokerage INTL FCStone.
"Then again, Bernanke may choose to stay on hold and not deviate from previous positions, in which case we could see an element of support set in over the precious group as the stimulus spigot would remain open for now."
Bernanke testifies before a congressional committee on Wednesday.
Federal Reserve official Charles Evans said the bank could continue its bond buying through the summer, but end it abruptly in the autumn if the central bank became confident the better jobs outlook was here to stay.
Spot silver was down 1.4% at $22.61 an ounce. It hit a session low of $22.41, not far off the two and a half-year low of $20.84 on Monday, when it eventually closed 3% higher.
US silver futures were little changed at $22.58 an ounce after sliding by up to 9% during the early sell-off in Asia on Monday.
Holdings of the largest silver ETF, the iShares Silver Trust, had fallen to their lowest since mid-January. Outflows also continued in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, with holdings down to 1 031.50 tonnes on Monday, the lowest in more than four years.
US gold futures gained 0.2% to $1 386.90.
Physical demand in India, the world's top gold consumer, has been slowing as its central bank tries to rein in the country's deficit with steps to cut gold and silver imports, which shot up 138% in April. – Reuters