London: 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 per cent target.

Spot gold was down 0.1 per cent at $1,334.70 (Dh4,898.35) an ounce at 1207 GMT, on track for its first weekly gain in three weeks and a near one per cent monthly gain.

US gold was up 0.1 per cent at $1,332.90 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 US interest rates is on the cards for later this year.

Basket of currencies

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 per cent 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 down 0.7 per cent at $690.97 an ounce, after touching its highest since October 2015 in the previous session. It is up nearly 17 per cent this month, and on track to notch up its best monthly performance since February 2008.

Platinum was unchanged at $1,129.20 an ounce and was on track for its best month since January 2012, with more than 10 per cent 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 0.3 per cent at $20.08 an ounce, and headed for a second monthly gain.