By A. Ananthalakshmi
SINGAPORE (Reuters) - Platinum tumbled to a 5-1/2-year low on Tuesday as the combination of a stronger dollar, weaker gold prices and improving supply took a toll on prices.
Platinum, the worst performing precious metal of the year, fell to $1,098.10 an ounce during Asian hours, its lowest since July 2009. It is down more than 8 percent this year.
"The sentiment around platinum is quite negative. It's a combination of supply coming back online after the strikes last year and it's certainly getting no support from the gold market," said ANZ analyst Victor Thianpiriya.
Silver, platinum and palladium typically track gold prices, which are trading near a three-month low amid fears the Federal Reserve would soon hike U.S. interest rates.
A strong greenback, currently near a 12-year high against a basket of major currencies, is also dragging on dollar-denominated commodities.
Adding to these, platinum supply is getting better after a five-month strike last year in South Africa, the top producer.
Platinum is currently trading a discount of nearly $53 an ounce to gold - the biggest spread since March 2013.
Thianpiriya said the discounts could widen further.
"I wouldn't be surprised to see platinum at around $1,020 over the next six months or so," he said. ANZ expects gold to drop to $1,100 in the next three months.
Above ground stocks may have to be depleted further before platinum can make significant upside advances, HSBC analyst James Steel said.
GOLD EYES FED
Spot gold was steady at $1,155.91 an ounce by 0340 GMT, near last week's $1,147.10, the lowest since Dec. 1.
Traders were waiting this week's Fed policy meet to gauge the timing of a U.S. rate hike.
The U.S. central bank begins its two-day policy meet on Tuesday, with a statement expected on Wednesday.
Expectations that the Fed would begin increasing interest rates as soon as June on a strong economy have boosted the dollar. Higher rates could dent demand for assets such as bullion that do not pay any interest.
ETF Securities, an operator of gold-backed exchange-traded products, said its long gold funds witnessed the largest weekly outflows since inception last week.
Danny Laidler, the head of the firm's Australia and New Zealand operations, said $376.50 million of funds exited last week amidst a broad market selloff for gold.
"The prospect of higher U.S rates does not bode well for the precious metal," he said.
(Editing by Himani Sarkar)
