* World share index hits record high, Japan stocks at 5-month top
* Gold off highs after vicious short-covering rally
* US bond yields up as Fed seen comfortable with rising inflation
By Wayne Cole
SYDNEY, June 20 (Reuters) - An index of global stocks was near record highs on Friday while gold celebrated its biggest one-day rise in nine months as markets wagered monetary policy would stay super loose in the United States, Europe and Japan for a long time to come.
Investors had piled into bullion while selling U.S. government debt on the premise the Fed might be comfortable with higher inflation if it meant faster economic growth.
Spot gold was enjoying the view at $1,312.24 an ounce having been as far as $1,321.70 at one stage on Thursday when it climbed 3.3 percent.
Traders also said a major hedge fund had cut back a large short position in the precious metal which pushed prices above $1,300 an ounce and tripped a host of stop-loss buy orders.
Equities were in ebullient mood with MSCI's all-country world index, which includes about 85 percent of global investable equities, passing its previous all-time high set in November 2007.
Japan's Nikkei firmed 0.3 percent to a fresh five-month peak, while the broader TOPIX brought its gains to more than 10 percent in just the past four weeks.
MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.2 percent after rising 0.7 percent on Thursday. In Europe, the FTSEurofirst 300 index of regional shares had risen 0.6 percent to a six-year top.
Wall Street was more circumspect, though data on jobless claims and regional U.S. manufacturing continued to show improvement. The Dow had ended up 0.09 percent, while the S&P 500 gained 0.13 percent and the Nasdaq lost 0.08 percent.
The revival in risk appetite follows Wednesday's decision by the U.S. Federal Reserve to recommit to keeping rates near zero for some time to come.
Crucially, Chair Janet Yellen sounded unconcerned by inflation despite a recent pick-up in price pressure, surprising many who had thought the central bank would take a more hawkish turn.
TAKING INFLATION PROTECTION
"The dismissal of the recent up-shift in inflation readings as 'noise' was the biggest revelation," said William O'Donnell, head of U.S. government bond strategy at RBS.
"The Fed leadership is so unsure about the sustainability of the recovery that they are willing to wait for economic growth numbers and labour market indicators to beat them over the head before they consider removing emergency stimulus."
As a result the market has pushed out the day when the Fed might hike its funds rate, while also taking insurance against higher future inflation by buying gold and selling longer-dated Treasuries.