It looks SimpleXML creates a UTF-8 string, which is then displayed in ISO-8859-1 (Latin-1) or something like CP-1252.
When you save the result to a file and serve this file through a web server, the browser will use the encoding declared in the file.
Including web page
Since your webpage encoding is not UTF-8, you need to convert the string to any encoding you use, for example, ISO-8859-1 (Latin-1).
This is easy to do with iconv ():
$xmlout = iconv('UTF-8', 'ISO-8859-1//TRANSLIT', $xmlout);
Saving Database
The database column does not use UTF-8 collation, so you should use iconv to convert the string to the encoding used by your database.
Assuming your database sort is the same as the encoding you are visualizing, you don't need to do anything when reading from the database.
Explanation
In UTF-8, the 0xc2 prefix byte is used to access the upper half of the Latin-1 Supplement block, which includes characters such as accented letters, currency symbols, fractional parts, superscripts 2 and 3, copyright and registered characters trademark, and inextricable space.
However, in ISO-8859-1, the 0xC2 byte represents Γ. Therefore, when your UTF-8 string is misinterpreted as one of them, you get Γ followed by some other meaningless character.