Silver price drops on stimulus worries, gold follows
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Silver slid nearly 4 percent on Tuesday, falling a second straight session after its biggest rally in five years, as worries over the US stimulus outlook and technical selling dragged it lower and gold followed.
Silver was already edging down in early Asian trading but once prices fell through Monday's low of $22.94 an ounce, stops were triggered, causing a sharp sell-off, traders said.
Gold was wavering between losses and gains earlier but fell as much as 0.9 percent after silver crashed. This is the yellow metal's second straight session of losses after posting its biggest weekly gain in five weeks.
"We need a correction. The rally looks a bit overdone to me," said one Hong Kong-based precious metals trader. "The correlation with the dollar and US yields have not been working at all since last week."
Gold prices typically fall as bond yields improve and the US currency strengthens.
Last week's 5 percent rise in gold was largely due to technical buying after prices rose above the $1,350 mark and some support from physical buying in Asia.
The focus has now shifted to looking for further signals on the Federal Reserve's stimulus measures when the US central bank on Wednesday releases minutes of its July policy meeting.
Spot gold fell to a low of $1,352.2 an ounce before paring some losses to trade down 0.6 percent at $1,357.85 by 0726 GMT.
Silver fell as much as 3.7 percent, after posting a 13 percent gain last week. Silver had gained for 8 consecutive sessions as of last Friday.