An employee displays gold models of elephants at the "Gem and Jewellery India International Exhibition 2013" (GJIIE) in Chennai, March 17, 2013. REUTERS/Babu

By Marcy Nicholson and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold and silver prices rallied 2 percent to their highest since January last year on Friday as the Bank of Japan's decision the previous day to hold off expanding monetary stimulus weighed heavily on the dollar, and European and U.S. stocks fell.

The yen hit an 18-month peak versus the U.S. currency and was on course for its biggest weekly gain since the 2008 financial crisis, with poor U.S. growth and the Federal Reserve's cautious stance this week weighing on the dollar. [FRX/]

Spot gold (XAU=) was up 2 percent at $1,291.11 an ounce at 2:16 p.m. EDT (1816 GMT), having reached a 15-month high of $1,296.76. U.S. gold futures (GCv1) for June delivery settled up 1.9 percent at $1,290.50 an ounce.

For the week, the metal is up 4.8 percent in what is set to be its biggest weekly rise since the week ended Feb. 12.

"All the precious metals are up quite strongly on the back of weakness in the dollar, after poor GDP data in the United States and a lack of action by the Bank of Japan," Capital Economics analyst Simona Gambarini said.

"There could be a correction in the price if the dollar starts strengthening again, but we remain positive on gold."

The Fed's policy statement on Wednesday, after leaving interest rates unchanged, also supported gold. The U.S. central bank showed little sign it was in a hurry to tighten monetary policy.

Gold is sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.

"We believe we are not transitioning to a risk-off world, but simply to a less risk-on one, as lower real rates should stabilise and require stronger global data to then lift interest rates and risk in tandem," said TD Securities in a note.

Silver (XAG=) was up 1.5 percent at $17.80 an ounce, having touched its highest since January 2015 at $17.96 and being on track to rise 15.3 percent this month, its biggest gain since August 2013 as it plays catch-up after lagging gold during its first-quarter surge.

The gold/silver ratio, which measures the number of silver ounces needed to buy an ounce of gold, fell to a six-month low on Friday of 71.8, down from 81.3 at the start of the month.

Platinum (XPT=) was up 2.5 percent at $1,071.49 an ounce, off an earlier 10-month high of $1,080, while palladium (XPD=) rose by as much as 2.3 percent to $634.96 an ounce, the highest in nearly six months.





(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Dale Hudson and Chizu Nomiyama)