LONDON: Silver fell to a three-week low day on Wednesday and gold eased as precio US metals came under pressure to correct after a strong rally in the last few weeks.
US silver futures have lost 14 percent over the past four sessions, wiping out gains from the previous three weeks that took the price to a 31-year top just below $50 on April 25.
US July silver futures fell to $40.88 an ounce by 1133 GMT, extending an 8-percent slide on Tuesday, when CME Group
raised margin requirements on silver futures for the third time in a week.
Spot silver was bid at $40.88 versus $41.64 in New York late on Tuesday. It earlier fell to $40.30 an ounce, its lowest since mid-April.
"It seems to be the same price pattern we have seen in the last few days: the silver price retreats heavily overnight then almost recovers losses in early trading before it retreats again in later trading," Commmerzbank analyst Daniel Briesemann said.
"Generally speaking we still think that silver prices will come down quite significantly over the next few weeks. The price rise to the high at end-April was definitely exaggerated and a price correction was overdue, now it's going this way."
Spot gold was bid at $1,534.60 an ounce, having hit a record $1,575.79 an ounce on Monday, and compared with $1,540.38 the previous day. COMEX gold lost some 0.3 percent to $1,535.8.
CHINA INFLATION OUTLOOK
Silver is still one of the top-performing commodities of the year, having risen by almost 45 percent.
But investors remained wary of a market in almost chronic surplus and a highly volatile price.
Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust , fell 0.42 percent from Monday to Tuesday, while the largest silver-backed ETF, New York's iShares Silver Trust, fell 0.95 percent.
"Even as gold has underperformed silver to the downside, so it should be seen as a buy much sooner than silver will be, perhaps closer to $1,500 where our one-month forecast sits," UBS said in a research note.
"Silver, by contrast, could well move down to the mid-$30s, though a near-term rebound to the $45 area can't be ruled out - making the metal difficult to trade at present, whether from the long side or the short side."
Beyond the correction, gold and silver are expected to resume their upward trend, as worries about rising inflation and ongoing unrest in the Middle East and North Africa, as well as low US interest rates may continue to drive investors to these precious metals, traders said.
Chinese inflation is expected to moderate in the second half of the year as government measures to curb price rises hit their mark, said a senior central bank official.
The statement is unlikely to dampen the long-term sentiment in gold, traders and analysts said.
The European Central Bank, which has raised interest rates last month, is expected to signal its readiness to hike rates again when it meets on Thursday.
Platinum was lower at $1,839.74 an ounce, while palladium fell more than 2 percent to $763.72.
