* BOJ stimulus falls short of expectations
* Palladium, platinum on track to notch best monthly gains in years (Adds comments, updates prices)
By Sethuraman N R and Vijaykumar Vedala
BENGALURU, July 29 (Reuters) - Gold remained steady on Friday and was on track for a monthly gain of 1 percent, 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. dollar last traded at 103.28 yen JPY= , down 1.8 percent. The dollar index .DXY , which measures the greenback against a basket of currencies, was down 0.4 percent at 96.363. USD/
Spot gold XAU= eased by 0.1 percent at $1,333.33 an ounce at 0740 GMT, on track for its second straight session of monthly gains, and was headed for its first weekly gain in three.
U.S. gold GCcv1 too remained unchanged at $1,331.90 an ounce.
"Maybe at this moment, the BOJ's decision is a bit supportive for gold," said Dominic Schnider of UBS Wealth Management in Hong Kong.
"If you ask me which is still the better safe-haven story... It is gold and not yen. At one stage, the BOJ need to do more in order to keep the economy going. That will make yen negative."
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. palladium XPD= , rose 0.4 percent at $695.72 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 XPT= rose 0.5 percent at $1,133.75 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 XAG= was down 0.2 percent at $20.11 an ounce, and headed for a second monthly gain, after a 7.6 percent rise in July.