* Dollar extends gains ahead of Fed meeting
* Coming up: U.S. Federal Reserve rates decision, statement
* Platinum/gold ratio declines as yellow metal outperforms
(Updates prices)
By Jan Harvey
LONDON, Aug 10 (Reuters) - Gold prices fell for a second day
in Europe on Tuesday as the dollar strengthened, but prices did
not stray far from $1,190 an ounce as traders awaited the
outcome of a U.S. Federal Reserve monetary policy meeting.
Spot gold <XAU=> was bid at $1,192.10 an ounce at 1445 GMT,
against $1,200.00 late in New York on Monday. U.S. gold futures
for December delivery <GCZ0> fell $8.40 an ounce to $1,194.20.
The Federal Open Market Committee releases its decision on
interest rates and issues a policy statement at 1815 GMT after a
one-day meeting.
Market watchers are awaiting any signal that would suggest
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 euro <EUR=> extended losses to trade more than 1 percent
lower against the dollar as the greenback was boosted by a
growing view that the Fed is unlikely to unveil any aggressive
measures to further loosen monetary policy. []
Strength in the U.S. unit curbs gold's appeal as an
alternative asset and makes dollar-priced commodities more
expensive for non-U.S. investors.
Speculation has emerged in recent days that the Fed may take
new measures to extend its quantitative easing programme, 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 last week's three-week highs resulted in
a slight improvement 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. []
Among other precious metals, silver <XAG=> was at $18.06 an
ounce versus $18.29, platinum <XPT=> was at $1,532.50 an ounce
versus $1,540 and palladium <XPD=> was at $473 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.
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For a chart of the platinum/gold ratio:
http://link.reuters.com/wek34n
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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.
(Additional reporting/graphic by Amanda Cooper; Editing by Sue
Thomas)
