PRECIOUS-Gold hits 6-1/2-month top, BOJ move extends stimulus rush

* Bank of Japan to boost asset purchases amid global
slowdown
* More central banks may follow, boosting gold's appeal
* Coming Up: U.S. existing home sales; 1400 GMT

(Recasts, adds Bank of Japan, analyst comment)
By Lewa Pardomuan and Manolo Serapio Jr
SINGAPORE, Sept 19 (Reuters) - Gold shook off early losses
to hit its highest level in 6-1/2 months on Wednesday after
Japan joined the United States and Europe in mounting more
stimulus measures to boost its economy, raising gold's appeal as
a hedge against inflation.
The Bank of Japan increased its asset buying and loan
programme, currently its key monetary easing tool, by 10
trillion yen ($127 billion) to 80 trillion yen with the
increment aimed at purchases of government bonds and treasury
discount bills.
Efforts by Japan, and before that the Federal Reserve and
the European Central Bank, to spur economic activity via bond
purchases should weaken currencies and lift inflation, both
supportive of gold, said Jeremy Friesen, commodity strategist at
Societe Generale.
"I think other central banks will announce more
accommodative policies and that should continue to support
gold," said Friesen.
Spot gold rose as high as $1,779.10 an ounce, its
loftiest since Feb. 29. By 0656 GMT, gold was up 0.4 percent at
$1,777.89.
Gold has risen around 17 percent since hitting this year's
low of $1,527 in May, buoyed by measures by central banks to
help the global economy.
U.S. gold for December delivery rose half a percent
to $1,780.40.

PHYSICAL DEMAND
The BOJ's action aided a rebound in Asian shares, raising
speculation of more big central bank efforts to support growth.

Platinum gained $17 to $1,634.49 an ounce, after
falling earlier in response to news of an agreement at Lonmin's
Marikana mine that ended six weeks of violent labour
unrest.
Platinum was vulnerable to a pullback due to sluggish global
industrial demand, said dealers, although labour issues with the
South African mining sector could also underpin prices.
Commodities slumped on Tuesday for a second day as nagging
economic problems in the United States and Europe made investors
cautious about the demand outlook for oil, metals and crops at
prices that had spiked on stimulus efforts by central banks.

The physical gold market was subdued but dealers expected
main consumer India to buy again later in the day due to the
festive season there, which peaks in November with Diwali, the
Hindu festival of lights.
"We saw some physical demand yesterday, but it was not
great. Thailand was in the market," said a dealer in Singapore,
who offered gold bars at premiums of 20 to 40 cents.
"Demand from India is picking up. They have been buying
lately, although they are pretty quiet this morning. They will
possibly come back to the market today."
Holdings of the largest gold-backed exchange-traded-fund
(ETF), New York's SPDR Gold Trust GLD rose 0.14 percent on
Tuesday from Monday, while those of the largest silver-backed
ETF, New York's iShares Silver Trust SLV, remained unchanged
during the same period.

Precious metals prices 0656 GMT
Metal Last Change Pct chg YTD pct chg
Spot Gold 1777.89 6.20 +0.35 13.69
Spot Silver 34.93 0.15 +0.43 26.15
Spot Platinum 1634.49 17.09 +1.06 17.34
Spot Palladium 671.40 8.60 +1.30 2.90
COMEX GOLD DEC2 1780.40 9.20 +0.52 13.63
COMEX SILVER DEC2 34.98 0.26 +0.75 25.31
Euro/Dollar 1.3063
Dollar/Yen 79.11

COMEX gold and silver contracts show the most active months

(Editing by Ron Popeski)