BENGALURU - Gold prices fell to a more than 18-month low on Wednesday as the dollar hit an over 13-month peak on demand emerging from concerns about Turkey's financial turmoil.
The greenback, in which gold is priced, has been bolstered by a fall in the euro, which has been dogged by concerns over the European banks' exposure to Turkey.
The index tracking the dollar against a group of six major currencies hit the highest since June 27, 2017 at 96.874.
Spot gold was down 0.45 percent at $1,189 an ounce at 0709 GMT, after hitting its lowest since late January 2017 at $1,185.92.
U.S. gold futures were down 0.47 percent at $1,195 an ounce.
Risks originating from issues in Turkey have driven investors away from normal safe-haven assets such as gold towards currency markets, ANZ analyst Daniel Hynes said.
"The dollar will continue to be the safe-haven asset of preference. As a consequence, gold prices are really going to struggle," he said.
The dollar has strengthened against the Turkish lira, driven by worries over President Tayyip Erdogan's calls for lower interest rates and fraying ties between the United States and Turkey, a NATO ally.
Erdogan said on Tuesday Turkey would boycott electronic products from the United States, retaliating in a row with Washington that has sent the lira to record lows.
The yellow metal has declined about 9 percent this year, pressured by rising U.S. interest rates, a soaring dollar and failure to capitalize on its traditional role as a hedge against global and financial uncertainty.
Investors, on other hand, have opted for U.S. Treasuries, seen as the ultimate safe haven, which meant they had to buy dollars.
This has led to a consolidation in gold through liquidations in exchange-traded funds (ETFs) and record level of short positions.
Holdings in SPDR Gold Trust, the world's largest gold-backed ETF, fell 1.01 percent to 776.65 tonnes on Tuesday. Holdings have fallen to their lowest since February 2016, down 11 percent from their peak in April.
"If gold closes below $l,190, prices will extend their fall to $1,150 or even more ... We don't expect any major bounce-back as all fundamentals are negative for gold," said Hareesh V, head of commodity research, Geojit Financial Services, based in the southern Indian city of Kochi.
Spot Platinum fell 2 percent to a low of $781.70, its lowest since December 2008. It was last down 1.5 percent at $785.50
Spot silver was 0.3 percent lower at $14.91, after falling to its lowest since April 1, 2016 at $14.85. Palladium was down 0.4 percent at $893.75.