* Chinese car sales grow at slowest rate in 15 months
* Coming up: U.S. Federal Reserve meeting on Tuesday
(Updates prices, adds comment)
By Jan Harvey
LONDON, Aug 9 (Reuters) - Gold prices steadied on Monday as
the dollar recovered lost ground against the euro, but
uncertainty ahead of a U.S. Federal Reserve policy meeting later
this week supported the precious metal above $1,200 an ounce.
Spot gold <XAU=> was bid at $1,203.65 an ounce at 1424 GMT,
against $1,203.30 late in New York on Friday. U.S. gold futures
for December delivery <GCZ0> rose 50 cents to $1,205.80.
The metal broke above the $1,200 an ounce level to hit its
highest since mid July last week after weaker-than-expected U.S.
payrolls data fuelled concerns over the outlook for the U.S.
economy, knocking the dollar.
A spate of soft U.S. economic data has led to talk that the
Fed may announce some kind of additional monetary easing, such
as bond purchases, after its meeting on Tuesday.
"It is the weakness in the United States and the potential
for some loosening in monetary policy measures that are really
positive for gold," said Michael Widmer, an analyst at Bank of
America-Merrill Lynch.
The central bank is expected to renew its vow to keep rates
near zero for an extended period. []
Expectations that the dollar, which historically has a close
inverse correlation with gold, will weaken further are also
supporting the metal.
The U.S. unit managed to recover from early lows to rise
against the euro and a currency basket on Monday, but trade is
choppy and uncertain ahead of the Fed meeting. []
"After breaking down for most of the year, the inverse
dollar/gold relationship may be reasserting itself," said HSBC
analyst James Steel in a note.
"Both gold and the euro have moved directionally together
since 28 July. HSBC currency research forecasts a weaker dollar
for the second half of 2010. Should the traditional inverse
dollar/gold relationship hold, gold is likely to be supported by
the dollar."
STOCKS EDGE UP
On the wider markets, U.S. stocks opened higher on Monday,
while European shares also climbed. Oil prices rose 0.6 percent
to above $81 a barrel. [] [] []
Rising gold prices translated into a fall-off in physical
demand from Indian buyers, however. Buying retreated on Monday
after a firm two weeks, traders reported. []
"Prices will have to come down below $1,200 and rupee will
have to appreciate below 46 for demand to pick up again," said a
dealer with an Indian private bank.
Among other precious metals, silver <XAG=> was bid at $18.33
an ounce against $18.31. Platinum <XPT=> was at $1,551.50 an
ounce against $1,563.25, while palladium <XPD=> was at $481 an
ounce versus $484.05.
The ratio of gold to platinum -- or how many gold ounces are
needed to buy an ounce of platinum -- fell to a two-week low of
1.29 on Monday, meaning the yellow metal is becoming
increasingly expensive compared to platinum.
Appetite for platinum group metals, which are widely used in
car manufacturing, has been tempered by relatively soft auto
sales data. Data showed Chinese car sales rose at their slowest
in 15 months in July as the world's largest auto market cooled.
[]
"While platinum group metals remain under pressure on a lack
of follow-through buying from last month's strength, gold could
continue to be supported by a weaker dollar," said Morgan
Stanley in a note.
(Editing by James Jukwey)
