Silver fell as much as 5 percent to a 4-1/2 year low of $15.17 an ounce, and was down 3.5 percent at $15.45.
"Gold prices are heavily influenced by financial speculators, who are divesting via ETFs and derivative instruments," Gold Junior Fund manager Angelos Damaskos said.
"And given macroeconomic forces such as the dollar strength, gold may go lower still in the short term."
Analysts said investors were rushing for downside protection through gold options. Comex data on Tuesday showed open interest in $1,075 December put options, which give buyers the option to sell at that price, surged more than 3,500 lots over the past few sessions.
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The dollar rose 0.6 percent against a basket of leading currencies to touch a 4-1/2 year high after victory by Republicans in the United States' mid-term elections raised hopes for an end to political gridlock in Washington.
A stronger greenback makes gold more expensive for holders of other currencies, and dulls its appeal as a hedge.
Underscoring bearish investor sentiment towards bullion, holdings in SPDR Gold Trust, the top gold-backed exchange traded fund, slumped to a six-year low of 738.82 metric tons.
Physical buying of jewelry, coins and bars—which usually picks up at lower prices—has not emerged robustly enough to put a floor under prices.
"There is very little on the horizon that is bullish. Despite the trillions of dollars of stimulus over the past several years, most central bankers are worried about deflation, not inflation," said INTL FCStone analyst Edward Meir. "In addition, the roaring U.S. equity markets continue to siphon off assets away from alternative investments, including gold."
Precious metals could see further downside, especially around the release of U.S. jobs report on Friday, traders said. A strong report could further boost economic optimism and the dollar.
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A sharp break in gold prices to their lowest levels in more than four years has prompted a pick-up in demand for coins in Europe and the United States.
The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, hit its highest since early 2009 at 75 to one, also unleashing demand for silver coins and bars.
But demand for gold in top buyer China has been disappointing as consumers there wait for prices to fall further.
On Wednesday, local prices on the Shanghai Gold Exchange dipped to a discount of about 50 cents an ounce to the global benchmark, indicating weak buying interest.
Chinese prices had been at a discount on Monday but had gained to a small premium of up to $1 on Tuesday.
Among the other precious metals, platinum fell 1.3 percent to $1,197.10 an ounce, getting close to its lowest since 2009, while palladium fell 2.6 percent to $762.45 an ounce.