Gold edges down after BOJ action, still set for monthly gain

By Clara Denina

LONDON (Reuters) - Gold steadied on Friday, as investors assessed the impact of a modest Bank of Japan stimulus, and was on track for a second monthly gain in a row, while the dollar retreated.

The Bank of Japan expanded monetary stimulus on Friday through a modest increase in purchases of exchange-traded funds, yielding to pressure from the government and financial markets for bolder action to spur growth and accelerate inflation towards its 2 percent target.

Spot gold was down 0.1 percent at $1,333.60 an ounce at 1015 GMT, on track for its first weekly gain in three weeks and a near one percent monthly gain.

U.S. gold was down $1.70 at $1,330.60 an ounce.

"The main focus for gold is the uncertainty surrounding the Fed," said ING Bank senior strategist Hamza Khan, adding that today's modest action by the Bank of Japan will be followed by investors in relation to the impact on the Federal Reserve's decision to lift rates.

At this week's policy meeting the Fed stopped short of indicating that a further increase in U.S. interest rates is on the cards for later this year.

Uncertainty over the path of interest rates has held gold in check since it rallied to more than two-year highs in the wake of Britain's shock vote last month to leave the European Union.

Gold's downside was capped by a lower dollar, which fell 0.5 percent against a basket of six currencies, mostly due to strength of the yen.

Spot gold looks neutral in a range of $1,333.99-$1,346 per ounce, and an escape will point to a direction, according to Reuters technical analyst Wang Tao.

Palladium was unchanged at $695.50 an ounce, after touching its highest since October 2015 in the previous session. It is up nearly 17 percent this month, and on track to notch up its best monthly performance since February 2008.

Platinum rose 0.2 percent at $1,129.80 an ounce and was on track for its best month since January 2012, with more than 10 percent growth this month. It hit a 14-month high on Wednesday.

"We are bullish on the PGMs (platinum group metals) fundamentally, but we are unclear as to whether or not fundamental motivations have been driving the current PGM rally," HSBC said in a note.

Silver was down 0.4 percent at $20.07 an ounce, and headed for a second monthly gain, after a 7.6 percent rise in July.

(Additional reporting By Nallur Sethuraman and Vijaykumar Vedala in Bengaluru; Editing by Adrian Croft)