Gold fell for an eighth straight session on Monday to its weakest level in over a month, as fears that the U.S. Federal Reserve may wind back its economic stimulus programme hurt the metal's appeal as a hedge against inflation.
Investors have been dumping gold, which is down 20 percent so far this year, as stocks and the dollar continue to outperform. If gold closes in the red on Monday, it would match the metal's longest losing streak since March 2009.
"Investors are very bearish at the moment," said Yuichi Ikemizu, branch manager for Standard Bank in Tokyo. "The stock market and the dollar are quite strong. It's a natural move for investors to switch their money from commodities to equities."
Data showed Americans felt better about their economic and financial prospects in early May, with consumer sentiment at its highest in nearly six years, while a gauge of future economic activity rose in April to a near five-year high.
Spot gold hit a session low of $1,338.95 an ounce, its lowest since touching a two-year trough of $1,321.35 during the April 16 sell-off that was prompted by worries that European countries could liquidate gold reserves.
"Coin and jewelry buyers do not seem to be stepping in as aggressively as they were last month when gold underwent its initial $200 an ounce swoon," said Edward Meir, a metals analyst at futures brokerage INTL FCStone.
By 0349 GMT, gold was down 1 percent at $1,345.46.
Silver, which has fallen 30 percent in 2013, was down 4 percent at $21.32 an ounce after touching $20.84 at one point - its lowest since September 2010.
The slide came after an unidentified investor sold off a big chunk of silver holdings on Monday morning, Ikemizu said.
The gold-silver ratio is at its highest level since September 2010 with an ounce of gold currently buying 63 ounces of silver. That is twice as much as in April 2011, when silver was trading considerably higher.
U.S. gold futures fell as much as 2 percent, while silver futures dropped over 9 percent.
Hedge funds and other big speculators in commodities have started selling gold in a big way, trade data showed on Friday, just a month after they supported the precious metal amid a record tumble in its price.
Money managers, including hedge funds, pulled $1.4 billion from the U.S. gold futures market for the week ended May 14 by trimming their net long positions in the metal, according to Reuters calculations of data released by the Commodity Futures Trading Commission.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.29 percent to 1038.41 tonnes on Friday from 1041.42 tonnes on Thursday, their lowest in four years.
Meanwhile, gold traders and jewellers in India, the world's biggest buyer of the metal, were scrambling for supplies after the central bank restricted imports on a consignment basis, triggering a surge in premiums.