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The Fed left interest rates unchanged after its latest meeting on Wednesday and, while keeping the door open to a hike in June, showed little sign it was in a hurry to tighten policy amid an apparent slowdown in the US economy.

Spot gold was up 0.7 per cent at $1,254.96 an ounce at 1155 GMT, off an earlier one-week high of$1,258.70, while US gold futures for June delivery were up $6.70 an ounce at $1,257.10.

The longer the Fed holds off on raising rates, the better for gold," HSBC said in a note. "The bullion market will now focus on the prospects of a Fed hike at the next meeting in June, and the possibility that the Fed will tighten later this year may help cap bullion prices."

Gold headed for the biggest weekly advance since February as the dollar tumbled to a 10-month low, boosting the appeal of alternative assets. Silver was set for the biggest monthly gain since 2013.

Bullion for immediate delivery traded at US$1,274.24 an ounce at 9:33 am in Singapore, from US$1,266.26 on Thursday when it surged 1.6 per cent, according to Bloomberg generic pricing. The metal is 2.7 per cent higher this week. Silver climbed as much as 1.7 per cent to US$17.8465 an ounce, the highest since January, 2015.

Gold's rally this year was given added impetus after the Bank of Japan on Thursday held off from additional easing and as weaker-than-predicted US growth supported the Federal Reserve's decision to keep monitoring data before hiking interest rates again.

The odds that the Fed may increase borrowing costs in June dropped to 12 per cent from 20 per cent at the beginning of this week. The Bloomberg Dollar Spot Index slumped to the lowest since June as the yen led gains against the US currency this week.

The dollar and euro posted their biggest daily losses against the yen in more than five years on Thursday after the BOJ policy decision. The yen set an 18-month high against the dollar on Friday, and the greenback fell 0.4 percent against a basket of major currencies.

"The main reason for the rally is that the markets expected the BOJ to announce more easing measures and the dollar is continuing to weaken," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong. "There are quite a lot of people on the long side. So I think the momentum will continue for both metals," said Leung.

Reference: Bloomberg, Reuters, Business Today