* Dollar strengthens vs currency basket ahead of Fed meeting
* Coming up: U.S. Federal Reserve rates decision, statement
* Platinum/gold ratio declines as yellow metal outperforms
(Updates prices, adds comment)
By Jan Harvey
LONDON, Aug 10 (Reuters) - Gold prices retreated towards
$1,190 an ounce in Europe on Tuesday as the dollar strengthened,
but direction was weak as traders awaited the outcome of a U.S.
Federal Reserve monetary policy meeting later in the day.
Spot gold <XAU=> was bid at $1,192.20 an ounce at 1236 GMT,
against $1,200.00 late in New York on Monday. U.S. gold futures
for December delivery <GCZ0> fell $7.70 an ounce to $1,194.90.
The Federal Open Market Committee is due to report its
decision on interest rates and issue a policy statement at 1815
GMT after a one-day meeting.
Market watchers are awaiting any statement that would point
to further monetary easing, and for a reiteration that interest
rates will stay low for an extended period.
"That would be gold supportive. It cuts the opportunity cost
of investing in gold," said Citigroup analyst David Thurtell.
"More monetary stimulus, more liquidity should be favourable for
gold as well," he added.
The dollar rose 0.5 percent against a basket of six major
currencies <.DXY> as traders trimmed short positions ahead of
the Fed meeting. []
Strength in the U.S. unit curbs gold's appeal as an
alternative asset and makes dollar-priced commodities more
expensive for holders of other currencies.
Speculation has risen in recent days that further measures
may be taken by the Fed to extend quantitative easing, through
steps such as reinvesting funds to maintain its balance sheet.
[]
Any signs of further quantitative easing are likely to be
negative for the dollar, and positive for gold, analysts said.
HSBC pointed out in a note that while further quantitative
easing was seen to be on the table for the United States, the
euro zone appeared to be backing away from QE, while Japan had
avoided implementing such measures.
"The United States looks like it may increase the money
supply while other central banks do not -- this should weaken
the U.S. dollar," it said.
"If the traditional inverse dollar-gold relationship, which
broke down with the onslaught of sovereign risk crisis, is
reemerging, then this should be positive for gold prices."
INDIAN BUYING TRICKLES IN
Gold's retreat from the three-week highs it hit last week
resulted in a slight uptick in Asian physical demand.
Traders bought more metal in India, the world's largest gold
consumer, as prices eased below $1,200 an ounce, but interest
was limited by a weaker rupee, which makes the dollar-quoted
asset more expensive for local buyers. []
"There is buying, but not as much as we saw in the last two
weeks," said one Mumbai-based dealer. "(There) is buying below
$1,200 (an ounce)."
Among other precious metals, silver <XAG=> was at $17.97 an
ounce versus $18.29, platinum <XPT=> was at $1,523.50 an ounce
versus $1,540 and palladium <XPD=> was at $471 versus $475.
The platinum-gold ratio -- a measure of how many ounces of
gold are needed to buy an ounce of platinum -- eased to a 2-1/2
week low of 1.28, showing gold was becoming increasingly
expensive compared to platinum.
In a monthly report, ScotiaMocatta said a mixed picture for
car sales, redemptions in platinum- and palladium-backed
exchange-traded funds and a softer technical picture all pointed
to a softer outlook for the platinum group metals.
"Overall we expect further consolidation in the PGMs, and in
the short term expect prices to pull back to retest support," it
said.
(Editing by Alison Birrane)
