Gold surged to an all-time high above $1,200 an ounce on Wednesday, hitting a record for a second straight day, and Asian stocks advanced as investors chased riskier assets offering higher returns.
Spot gold rose 1 percent to $1,208.70 amid a broad rally in commodities on expectations of rising global demand, fueled by upbeat U.S. home sales and analysts' forecasts that China's economy could grow by 10 percent or more this quarter.
Copper touched its highest level in 15 months.
Gold was also supported by weakness in the U.S. dollar, which was again on the defensive while the euro and high-yielding currencies extended gains as investor risk appetite showed little sign of waning as it usually does heading into the year end.
The dollar was flat against a basket of major currencies <.DXY>, while the yen came off earlier lows amid disappointment that emergency steps announced the Bank of Japan on Tuesday, primarily short-term funding for banks, did not go further to tackle deflation or help alleviate upward pressure on the yen.
The yen was trading at 86.91 to the dollar, up from Tuesday's low of 87.54. It has gained more than 4 percent this year, raising worries that exports are growing less competitive, threatening to tip Japan back into recession.
Some analysts had expected the BOJ to signal a return to a narrow form of quantative easing seen in 2001-06, when it slashed interest rates to zero and flooded markets with cash in a bid to spur growth.
The BOJ squandered any possible 'announcement effect' that would have bolstered the attempts to weaken the yen, said Glenn Maguire, chief economist at Societe Generale in Hong Kong. The entire episode seems to have the notion of 'rushed' all over it.
SHARES ADVANCE, OIL RETREATS
Investors pumped money back into equities across most of Asia as fears eased about potential global contagion from Dubai's debt repayment problems and after data showed pending U.S. home sales reached a three-and-a-half year high in October.
In addition, a survey by the Institute for Supply Management showed the U.S. manufacturing sector expanded last month for a fourth month, although by less than expected. The reports helped push the Dow Jones <.DJI> up 1.2 percent to a 14-month closing high. <.N>
The MSCI index of Asia Pacific stocks traded outside Japan <.MIAPJ0000PUS> was 1.3 percent higher while the Thomson Reuters index of regional shares was up 0.6 percent.
Japan's Nikkei share index <.N225> bucked the rest of Asia, dipping 0.2 percent on disappointment over the BOJ actions and the country's shaky economic outlook.
A Reuters Tankan survey showed Japanese manufacturers' confidence was at a one-year high but still negative and the pace of economic recovery is expected to slow.
Japanese government bond futures also fell after the central back action fell short of market expectations.
The commodities rally lifted shares in Australia where the benchmark index <.AXJ0> was up 1 percent as copper miner Kagara Ltd
Shares of Asian car makers also got a lift after data showed U.S. car sales rose in November, which analysts said was a further sign that the world's biggest economy is recovering.
Shares of South Korea's Hyundai Motor Co <005380.KS> climbed 1 percent after its U.S. sales rose 46 percent last month, putting it on course to boost its U.S. market share by a third this year.
Japan's Nissan Motor <7201.T> reported a 31 percent jump in U.S. sales last month, boosting its share price by 2 percent.
Oil prices eased 0.4 percent to around $78 a barrel after American Petroleum Institute data showed U.S. crude stocks rose much more than expected last week.
Inventories are still high while demand is relatively subdued, but the downside is limited ... when prices decline it attracts new buying supported by the view on macro economic recovery, said David Moore, commodities strategist at Commonwealth Bank in Sydney.
(Additional reporting by Nick Trevethan in Singapore and Anirban Nag in Sydney; Editing by Kim Coghill)