* Expectation of ECB, Fed easing strengthens franc
* SNB makes 38.5 billion Swiss franc profit during first half
* Profit boosted by big rise in shares, bonds
* Rise in gold prices also adds to profit (Recasts story to focus on efforts to tackle franc strength)
By John Revill
ZURICH, July 31 (Reuters) - Massive first-half profits at the Swiss National Bank underlined the challenge Switzerland's monetary overlords face: the expansive mood of other central banks is raising the value of its equities and gold but making it tougher to tame the country's own currency.
Profit rose to 38.5 billion Swiss francs ($38.85 billion) from 5.12 billion a year earlier. The SNB made 33.8 billion francs from valuation gains, dividends and interest payments from the shares and bonds bought to weaken the Swiss franc.
It also gained 3.8 billion francs from its gold, the SNB said on Wednesday, as low interest rates pushed up its value.
By the end of June, the SNB had built up foreign currency holdings to 778 billion francs - bigger than the Swiss economy - as it sought to weaken its home currency.
Even so, the franc has strengthened to levels seen last in mid-2017, after European Central Bank President Mario Draghi last week signaled another round of monetary easing as Europe's economic outlook dims.
"The SNB's profit has gained from the global rally in the prices for stocks and bonds in recent months, but I don't think they will be celebrating because this has been caused by the anticipation of looser monetary policy," said Alessandro Bee, an economist at UBS.
That will push up the value of the Swiss franc, which the SNB wants to hold down to protect the country's export-dependent economy, Bee said. A stronger franc makes Swiss exports more expensive.
In the first six months of 2019, the central bank posted an exchange-rate loss of 8 billion francs, as currency's strength meant overseas profits equalled fewer francs.
The main reason for the first-half profit rise was the surge in global equity markets amid expectations the U.S. Federal Reserve and the ECB will begin a new round of interest rate cuts to stimulate economies.
During the first six months of 2019, the SNB registered a valuation gain of 20.8 billion francs from its shareholdings and received 2.1 billion francs in dividends.
Around 80% of its foreign-currency holdings is in bonds and 20% in equities, broadly mirroring global indexes. Its top 25 holdings are in U.S. equities such as Apple, Facebook , Microsoft and Amazon.
The SNB's bond holdings increased in value by 14.2 billion francs and made 4.7 billion francs in interest payments.
The SNB made 1.1 billion francs from negative interest rates it charges on Swiss franc sight deposits it holds for commercial banks, one of the tools it uses to weaken the franc.
$1 = 0.9911 Swiss francs Reporting by John Revill and John Miller, editing by Larry King