Sell-off in gold miners wipes $8 bln off their market value

* Global (Shenzhen: 300465.SZ - news) gold mining index falls more than 8 pct

* Gold prices hit five-year lows, platinum slumps

* Randgold Resources down 4.5 pct, Fresnillo (Other OTC: FNLPF - news) down 4.3 pct

By Atul Prakash

LONDON, July 20 (Reuters) - A steep sell-off in shares of gold miners, tracking a plunge in the metal's price, wiped out more than $8 billion from their combined market value on Monday and pushed a global index of gold stocks to a 6-1/2-year low.

The Thomson Reuters Global Gold index slumped 8.5 percent to its lowest since late 2008, the biggest one-day percentage drop in two years, after gold prices sank.

Spot gold fell as much as 4 percent to its lowest in more than five years as concerns about a U.S. rate hike spurred selling, especially in top consumer China. Platinum prices dropped 5 percent to a 6-1/2-year low.

Investors have been finding less and less reason to hold gold as an insurance against risk, with the dollar strengthening ahead of what is expected to be the first increase in U.S. interest rates for nearly a decade.

"We are underweight on gold miners. In a declining gold price environment, the fact that gold miners are cheap doesn't matter as their cash flow drops faster than their investments," Ronny Claeys, senior strategist at KBC Asset Management, said.

"Gold is a hedge against everything that can go wrong. But at the moment it appears that not a lot is going wrong. We have an Iran deal, a Greece deal and we have good news from European and U.S. economies. There is no real reason for us to invest in gold and gold companies."

The dollar has gained 8.5 percent against a basket of currencies this year on U.S. rate hike expectations, making dollar-priced gold expensive for the holders of other currencies.

Shares (Frankfurt: DI6.F - news) in gold miner Randgold Resources fell 4.5 percent, taking total losses to 25 percent in the past 10 weeks. Fresnillo fell 4.3 percent, the top decliner in the FTSEurofirst 300 index of top European shares.

Randgold and Fresnillo are now relatively cheaper, trading at 23.3 times and 27.6 times their 12-month forward earnings respectively, against 27 times and 31 times a month ago, but that will not necessarily attract buyers.

Analysts said gold prices had fallen below the average cost of production for miners and could force some to cut output.

Some analysts picked Africa-focused Randgold as a better investment than others in the sector, with Paul Renken, senior mining analyst at VSA Capital, saying it was better placed due to its low cost of production and higher cash generation.

(Editing by Mark Potter)