Silver prices trimmed a fall on Tuesday that had ended the precious metal's surge to a record high, as option traders sold back metal to cover risks ahead of options expiry later in the day.
Spot silver prices had exploded in Monday's session, soaring to within 17 cents of the 1980 record high as options sellers bought silver when key strike levels at $45 and $50 came under threat of exercise.
People are watching out for options expiry, said Yingxi Yu, an analyst at Barclays Capital.
There are decent-sized open interests at the strike levels of $40, $45 and $50. When there are large positions, it tends to suggest that prices may sway to those levels on options expiry.
U.S. silver futures tumbled as much as 5.4 percent to $44.61 an ounce, and gained some lost ground to $45.52 by 0615 GMT. The contract rallied to $49.82 in the previous session, a hair off their record high of $50.35.
Spot silver lost 3 percent to $45.50, ending a 9-session winning streak and headed for its biggest daily loss in more than a month.
The market will remain very nervous, and we'll see how it goes after option expiry, said a trader in Singapore, who expected prices to move around the current level.
Spot gold fell 0.6 percent to $1,499.60 an ounce, after a seven-day record-setting rally that pushed prices to $1,518.10 on Monday.
U.S. gold also lost 0.6 percent to $1,500.10.
There is high open interest at key strike levels of $1,500 and $1,520 on COMEX gold, which will keep prices stable until at least later in the day, traders also said.
Investors are eyeing the U.S. Federal Reserve's policy setting meeting, which kicks off later on Tuesday, for clues to its policy stance.
Ben Bernanke is set to give on Wednesday the first regularly scheduled news briefing by a Fed chief in the bank's 97-year history.
The market will be watching out for any signs of what the Fed is going to do at the end of the second round of quantitative easing, said Yu of Barclays.
If Bernanke remains dovish, as he has been, it will provide indication that monetary policy will not be tightened significantly in the second half, which is pretty favorable for precious metals.
The dollar <.DXY> edged up on Tuesday, but is still seen wobbly, even after the euro slipped on remarks from the European Central Bank Governor Jean-Claude Trichet that a strong dollar is in the interest of the United States.
Platinum group metals fell in tandem with gold and silver. Spot platinum fell off a seven-week high of $1,836.74, down 1.1 percent to $1,799.24.
Spot palladium shed 0.7 percent to $752.50.
(Additional reporting by Nick Trevethan in SINGAPORE; Editing by Clarence Fernandez)