Gold edges higher on BOJ stimulus, set for monthly gain

By Sethuraman N R

BENGALURU (Reuters) - Gold inched higher on Friday, on track for a gain of more than one percent in July, as the dollar extended its losses after the Bank of Japan's stimulus fell short of market expectations.

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.

By coordinating its action with the government's big fiscal spending package, the BOJ likely aimed to maximise the effect of its measures on the world's third-biggest economy, which is struggling to escape decades of deflation.

The yen rose about 2.14 percent at 102.99 against the dollar, and the dollar index, which measures the greenback against a basket of currencies, was down 0.4 percent at 96.316.

Spot gold was up 0.4 percent at $1,341.16 an ounce at 0430 GMT. Bullion has risen 1.2 percent in July, its second straight monthly gain, and is heading for its first weekly gain in three.

U.S. gold was up 0.4 percent at $1,337.90 an ounce.

"With so many cross currents at play over the short-term, we would rather watch the action in gold from the sidelines for the time being, at least until Friday's news from both the U.S. and Japan is out of the way," INTL FCStone analyst Edward Meir said in a note ahead of the BoJ statement.

U.S. advance GDP data and employment wages figures, both for the second quarter, are due later in the day.

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

Meanwhile, palladium, rose 0.9 percent at $701.65 an ounce, after touching its highest since October 2015 in the previous session. It is up nearly 17 pct this month, and on track to notch its best monthly performance since February 2008.

Platinum rose 1.2 percent at $1,140.50 an ounce and was on track for its best month since January 2012, with a more than 11 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 analyst James Steel said in a note.

Silver was up 0.3 percent at $20.21 an ounce and was heading towards a second straight monthly gain, having risen over 8 percent in July.

(Reporting by Nallur Sethuraman and Vijaykumar Vedala in Bengaluru; Editing by Richard Pullin and Biju Dwarakanath)