Metals: what to do now

I was a little alarmed to see the sharp drop in gold and silver prices overnight, with both down around 5% in one day.

This takes the value of my holdings of gold to around 13% below cost, and silver around 4% below its more recent purchase price.  I now need to consider whether to buy more, hold (ie do nothing) or sell.  I'll try to present my thoughts on these options:

Buy
It is tempting to take advantage of the price falls and add to my positions, thus averaging down my cost price to capitalise on any rebound. The reasons for my original purchases are still valid (being global economic uncertainty and continued money printing), however it seems these factors are not the only ones driving the recent price movements. There is also some talk of Cyprus selling off its gold, but this really shouldn't move the market.

What is holding me back from adding more is that the original purchase was partly intended to be a hedge against income earning equities (which it certainly has been) and not a core investment, and that i don't want to get into a trap of buying more and more if it continues to fall. Given the lack of income generation, i don't want metals to become too large a component of my investment portfolio.

Hold
It is tempting to do nothing and ride out the volatility.  Unlike individual equities, metals can't really drop to zero and should always hold a solid amount of intrinsic value. A key consideration here is the time horizon for holding, in that for short term investments it might be better to cut losses and reinvest elsewhere. However in my case, i could easily hold these indefinitely and i have plenty of cash available for other investing opportunities.

Sell
This for me would be the hardest option, in that it would realise a cash loss, and i would then be kicking myself as the price no doubt recovered shortly after!  However, there are plenty of examples where investments have fallen in value and have never gone on to fully recover, for example the Nikkei in the late 80s.  Also, given the recent rally in equities, it would make little sense to sell my only real hedge against an equities pull-back.

I think the most likely option for now is to do nothing and see how the next few weeks play out. My holdings in metals represent an immaterial amount of total assets and the portfolio as a whole is still well in profit.