* Fed minutes show caution over world economy
* Dollar hits fresh 17-mth low vs yen
* Global stocks rise, limiting gold's upswing (Adds dollar move, updates prices)
By A. Ananthalakshmi
SINGAPORE, April 7 (Reuters) - Gold ticked up on Thursday after minutes from the Federal Reserve's last policy meeting showed caution over U.S. interest rates and the dollar slumped to fresh 17-month lows against the yen.
Minutes from the Fed's March 15-16 policy meeting released on Wednesday showed policymakers debated whether an interest rate hike would be needed in April, although a consensus emerged that risks from a global economic slowdown warranted a cautious approach.
Policymakers signalled at the close of last month's meeting that they expected to raise rates twice in 2016 but the timing of the hikes still appears up in the air. gold XAU= had gained 0.5 percent to $1,228.20 an ounce by 0659 GMT, after dipping 0.7 percent in the previous session on a recovery in stocks. Spot gold rose 16 percent in the first quarter of the year on speculation the Fed may delay hiking rates.
"The gold rally is being tested as risk appetite recovers, undermining the flight-to-quality demand for gold. Still the downside may be limited," HSBC analyst James Steel said.
"The longer the hikes are delayed, the better for gold prices," Steel said.
Gold is sensitive to rate increases as they lift the opportunity cost of holding the non-interest-yielding metal.
The Fed should be patient and cautious about raising short-term interest rates, but should nevertheless increase them in a sustained way, Dallas Fed President Robert Kaplan said on Wednesday. in SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund, rose 0.51 percent to 819.60 tonnes on Wednesday, the first inflow in nearly two weeks.
The dollar hit a fresh 17-month low against the yen on Thursday, staying on the defensive after the release of the Fed minutes. The dollar index .DXY slid 0.4 percent against a basket of major currencies. USD/
Asian share markets edged higher after a sharp rise in oil prices whetted risk appetite and boosted Wall Street. MKTS/GLOB
PRICES AT 0659 GMT
Metal
Last
Change Pct chg
Spot gold
1228.2
6.35
0.52 Spot silver
15.127
0.071
0.47 Spot platinum
948.5
6.5
0.69 Spot palladium
540.73
0.73
0.14 Comex gold
1230.1
6.3
0.51 Comex silver
15.13
0.076
0.5
COMEX gold and silver contracts show the most active months