Gold prices eased below $1,200 an ounce in Europe on Tuesday as the dollar strengthened, but remained supported by uncertainty ahead of a monetary policy meeting of the U.S. Federal Reserve later in the day.

Spot gold was bid at $1,197.20 an ounce at 5:05 a.m. ET, against $1,200.00 late in New York on Monday. U.S. gold futures for December delivery fell $3.20 an ounce to $1,199.40.

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.

Commerzbank analyst Daniel Briesemann said no change was expected in the bank's commitment to holding interest rates at record lows for an extended period.

My colleagues on the forex side think interest rates will stay at very low levels, and they won't change the wording, he said. In the short term that will definitely help the gold price via a weaker dollar.

Weakness in the U.S. unit lifts gold's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.

The dollar rose 0.35 percent against a basket of six major currencies .DXY as traders trimmed short positions ahead of the Fed meeting, with market watchers weighing up the possibility of further monetary policy loosening.

Speculation has risen in recent days that further measures may be taken by the Fed to increase liquidity, but steps taken are expected to be minor, such as reinvesting funds to maintain its balance sheet.

Any signs of further quantitative easing is 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).

Silver was at $18.15 an ounce versus $18.29, platinum was at $1,534.95 an ounce versus $1,540 and palladium was at $472.50 versus $475.

The gold-platinum 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 Sue Thomas)

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