Gold hits fresh 2017 lows as investors seek refuge elsewhere

By Chris Prentice and Zandi Shabalala

NEW YORK/LONDON (Reuters) - Gold prices sank below $1,200 per ounce on Monday to their lowest since late January 2017, losing out to U.S. Treasuries and a strong dollar as investors sought refuge from a financial market rout triggered by a crashing Turkish lira.

Investors traditionally use gold as a means of preserving the value of their assets during times of political and economic uncertainty and inflation, but it has this year failed to benefit. Instead investors have made a beeline for U.S. Treasuries, seen as the ultimate safe haven, which meant they had to buy dollars.

 

The lira has tumbled on worries over Turkish President Tayyip Erdogan's increasing control over the economy and deteriorating relations with the United States. An investor flight to safety lifted U.S. Treasury yields from four-weeks lows.

The dollar index <.DXY> touched a 13-month high before paring gains. The higher greenback makes dollar-denominated assets more expensive for holders of other currencies, which subdues demand - a relationship used by funds to generate buy and sell signals from numerical models.

Spot gold > was down 1.42 percent at $1,193.71 at 3:10 p.m. ET (1910 GMT), having earlier dipped to $1,191.35, its lowest since January 2017.

U.S. gold futures for December delivery settled down $20.10, or 1.65 percent, at $1,198.90 per ounce.

"Traditional haven buyers of gold now find it too expensive in dollars," said George Gero, a managing director at RBC Wealth Management.

Weekly U.S. government data on Friday showed that gold speculators hiked their bearish bet to a record in the most recent reporting week.

Holdings of the largest gold-backed exchange-traded fund (ETF), New York's SPDR Gold Trust , at 25.3 million ounces have dropped about 10 percent from their April peak and are at their lowest since February 2016.

Meanwhile, platinum prices neared the 10-year lows below $800 an ounce seen last month, due to a glut of metal.

Platinum is heavily used in catalysts in diesel vehicles that have fallen out of favour since 2015's Volkswagen emissions-rigging scandal.

The world's top producer of platinum is South Africa, which saw its rand currency > hit a two-year low due to contagion.

"Supply is holding up well as a weaker rand provides support to South Africa's mining industry," Julius Baer analyst Carsten Menke said in a recent note, adding this was because it would lower rand-based costs when expressed in dollars.

Platinum > fell 3.17 percent at $801.30, silver > was down 1.77 percent at $15.001 and palladium > lost 2.42 percent, trading at $888.

(Additional reporting by Apeksha Nair in Bengaluru; Editing by Andrea Ricci)