* U.S. Q2 GDP rises at a 1.2 percent rate
* BOJ stimulus falls short of market expectations
* Palladium, platinum on track for monthly gains
* GRAPHIC-2016 asset returns: http://reut.rs/1WAiOSC (Updates prices; adds comment, second byline, NEW YORK dateline)
By Marcy Nicholson and Clara Denina
NEW YORK/LONDON, July 29 (Reuters) - Gold rose to its highest level in nearly three weeks on Friday after much slower-than-expected U.S. economic growth weighed on the dollar, and was on track for a second monthly gain in a row.
The U.S. Commerce Department reported that GDP grew at an annual rate of 1.2 percent in the second quarter, far less than economists' estimates of 2.6 percent growth. gold XAU= , down initially, reached its highest level since July 12 at $1,353.90 an ounce after the U.S. data and was up 1.4 percent at $1,353.44 by 2:59 p.m. EDT (1859 GMT).
U.S. gold GCcv1 settled up 1.3 percent at $1,349 per ounce.
"The Fed's decision to lift rates is data-dependent and if figures continue to disappoint, like second-quarter GDP growth today, gold will push higher," Commerzbank (DE:CBKG) analyst Carsten Fritsch said.
At its policy meeting this week, the Federal Reserve stopped short of indicating that a further increase in U.S. interest rates is on the cards for later this year.
"You have lower odds now of a Fed rate increase in the near term," said Rob Haworth, senior investment strategist for U.S. Bank Wealth Management in Seattle, adding that he expects a U.S. interest rate hike in December.
"This GDP report isn't enough to take that off the calendar."
Uncertainty over the path of interest rates has held gold in check since it rallied to more than two-year highs in the wake of Britain's shock vote last month to leave the European Union.
The dollar .DXY fell 1.2 percent on Friday against a basket of six currencies.
The U.S. currency's decline was also due to the strength of the yen, after the Bank of Japan under whelmed investors by expanding monetary stimulus through only a modest increase in purchases of exchange-traded funds. XPD= rose 2.7 percent to $713.90 an ounce, the highest since October 2015. It is up nearly 19 percent this month, and on track to notch up its best monthly performance since February 2008.
Platinum XPT= climbed 2.7 percent to $1,157.60 an ounce, a 14-month high, and was on track for its strongest month since January 2012, with more than 12 percent growth this month.
"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 said in a note.
Silver XAG= was up 0.9 percent at $20.33 an ounce, and headed for a second monthly gain.
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http://reut.rs/1WAiOSC
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting By Nallur Sethuraman and Vijaykumar Vedala in Bengaluru; Editing by Susan Fenton and Sandra Maler)