* Speculators raised net gold shorts to record -CFTC

* GRAPHIC-2018 asset returns: http://tmsnrt.rs/2jvdmXl

* Weak rand supports platinum production in South Africa

(Updates prices)

By Zandi Shabalala

LONDON, Aug 13 (Reuters) - Gold prices sank below $1,200 perounce for the first time in 17 months on Monday, losing out toU.S. Treasuries and a stronger dollar as investors sought refugefrom a financial market rout triggered by a crashing Turkishlira.

Investors traditionally use gold as a means of preservingthe value of their assets during times of political and economicuncertainty and inflation.

But it has this year failed to benefit as investors made abeeline for U.S. Treasuries, seen as the ultimate safe haven,which meant they had to buy dollars.

A higher U.S. currency also makes dollar-denominated assetsmore expensive for holders of other currencies, which subduesdemand - a relationship used by funds to generate buy and sellsignals from numerical models.

Spot gold XAU= had dropped 0.9 percent to $1,199.36 anounce by 1406 GMT, having earlier dipped to $1,194.61, itslowest since March 2017.

U.S. gold futures GCcv1 were down 1 percent at $1,206.80.

The lira has tumbled on worries over Turkish PresidentTayyip Erdogan's increasing control over the economy anddeteriorating relations with the United States. MKTS/GLOB

"Gold is not doing what a lot of investors had hoped itwould do," said Andrew Cole, multi asset manager at Pictet AssetManagement, referring to gold losing its safe-haven appeal.

"The longer it doesnt behave as a risk-off hedge the morelikely it is that it won't."

Bearish sentiment can be seen in data from U.S. CommodityFutures Trading Commission showing gold speculators added 22,195contracts to their net short position in the week to Aug. 7,bringing it to 63,282 contracts, the largest since recordsbecame publicly available in 2006. urn:newsml:reuters.com:*:nL1N1V11LY

Holdings of the largest gold-backed exchange-traded fund(ETF), New York's SPDR Gold Trust GLD , at 25.3 million ounceshave dropped about 10 percent from their April peak and are attheir lowest since Feb 2016. HLDSPDRGT=XAU

First resistance in gold is seen at $1,212.50 and then atthe overnight high of $1,221.40 while initial support is seen at$1,200.00 and then at $1,190.00, Kitco Metals said in a note.

Meanwhile, platinum prices headed towards the 10-year lowsbelow $800 an ounce seen last month, due to a glut of metal.

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

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

"Supply is holding up well as a weaker rand provides supportto South Africas mining industry," Julius Baer analyst CarstenMenke said in a recent note, adding this was because it wouldlower rand-based costs when expressed in dollars.

Platinum XPT= fell 2.3 percent to $808 per ounce, silver XAG= slipped 0.5 percent to $15.19 and palladium XPD= lost0.7 percent to $903.69.

(Additional reporting by Apeksha Nair in Bengaluru; Editing byJan Harvey, Emelia Sithole-Matarise and Kirsten Donovan) ((zandi.shabalala@tr.com; +44 207 542 5937; Reuters Messaging:zandi.shabalala.thomsonreuters.com@reuters.net))