Gold prices retreated as the dollar strengthened but the metal was underpinned near the 6-1/2 month high it hit earlier after the BoJ became the latest central bank to announce a fresh round of bullion-friendly monetary easing. The metal climbed sharply last week after the Fed unveiled a third round of quantitative easing - money printing to buy bonds - following a ECB pledge to launch a new bond-buying programme.

Further monetary easing is expected to maintain pressure on long-term interest rates, keeping the opportunity cost of holding gold at rock bottom, as well as boosting liquidity, pressuring the dollar and fuelling long-term inflation concerns.

Spot gold was down 0.2 percent at $1,767.49 an ounce at 1239 GMT, while U.S. gold futures for December delivery were down $1.50 an ounce at $1,769.70. Earlier, spot prices rose as high as $1,779.10, their strongest since Feb. 29.

“Current monetary easing by central banks is warranted by weak economic growth and subdued inflationary pressures in developed economies,” BNP Paribas analyst Anne-Laure Tremblay said. “This trend is likely to continue until we see a notable improvement in economic growth trends.”

“It seems that the stars are now aligned for gold to move higher,” she said. “The next hurdle to overcome will be the $1,800 an ounce level, which we expect to be breached decisively in the fourth quarter.”

Gold prices erased gains as the euro fell against the dollar, with traders citing talk of European banks selling the currency and investors taking profits on its earlier gains versus the yen.

The dollar held onto gains after data showed U.S. housing starts rose by less than expected last month.

Interest in gold exchange-traded funds - popular investment vehicles for bullion which issue securities backed by physical metal - has been strong this week, with gold ETF holdings rising to an all-time high at 73.681 million ounces.

ETFs including New York’s SPDR Gold Trust and products operated by ETF Securities and Zurich Cantonalbank added 925,000 ounces of metal to their holdings on Monday alone, Reuters data showed.