* Fed says growth pause largely temporary * Financial markets strains ease, business investment up * U.S. stocks pull back after strong recent gains * Oil higher on outlook for China NEW YORK, Jan 30 (Reuters) - The euro climbed to a 14-month high and gold rallied on Wednesday after the Federal Reserve left its monthly $85 billion bond-buying stimulus plan in place. U.S. stocks pulled back after the Fed announcement but investors said that was more a reaction to gains in recent months. The Standard & Poor's 500 Index is on track to post its best month since October 2011 and its best January since 1997. The Fed said economic growth had stalled but indicated the pullback was likely temporary, describing the nation's job market as continuing its modest pace of improvement. It repeated a pledge to keep purchasing securities until the outlook for employment improves substantially.. A report earlier in the day showing the U.S. economy contracted in the fourth quarter had already bolstered expectations the Fed would continue its easy monetary policy. GDP data, which showed the world's largest economy in the fourth quarter unexpectedly suffered its first decline since the 2007-09 recession, supported that expectation. Gross domestic product fell at a 0.1 percent annual rate after growing at a 3.1 percent clip in the third quarter. "There is nothing obvious in the FOMC text that is going to result in a change in key market trends," Alan Ruskin, head of G10 FX strategy at Deutsche Bank in New York, said in reference to the Fed policy committee's statement. The euro was last at $1.3563, after climbing above 1.35 for the first time since December 2011. Spot gold prices up $12.01, or 0.72 percent, to $1675.40. Easy U.S. monetary policy adds to the attractiveness of the euro compared with the dollar. In recent years investors would buy the dollar as a safer haven on bad economic data, but at least on Wednesday, they saw the euro as a better bet. Gold rose on the poor GDP data and added to gains as it became cheaper for investors using currencies other than the dollar to buy. The U.S. GDP data also overshadowed a third straight rise in European economic confidence, an increase in European Central Bank crisis loan repayments and a solid sale of five- and 10-year Italian bonds, which provided fresh evidence of the recent improvement in the region. CONFIDENCE RALLY The benchmark 10-year U.S. Treasury note was unchanged, the yield at 1.9992 percent. "The unemployment rate is likely to fall below 6.5 percent next year, so the Fed may be raising interest rates as soon as mid-2014," said Kurt Karl, chief economist at Swiss Re, after the Fed statement. "The fiscal drag from the tax increases will be offset this quarter by rebuilding post-Sandy, so real GDP growth should still come in at 2 percent." Bund futures had already fallen to session lows, with investors taking the view that the contraction in the U.S. economy was not going to have significant impact on the Fed's policy moves. Bund futures fell as low as 141.36, down 46 ticks on the day. The Dow Jones industrial average ended down 44.00 points, or 0.32 percent, at 13,910.42. The Standard & Poor's 500 Index was down 5.88 points, or 0.39 percent, at 1,501.96. The Nasdaq Composite Index was down 11.35 points, or 0.36 percent, at 3,142.31. "This is a very modest pullback after a steep run," said Paul Zemsky, head of asset allocation at ING Investment Management in New York. "It is too soon for the Fed to start talking about the end of (their bond buying program); the economy needs stimulus to sustain this recovery." European shares suffered their biggest daily drop this month, with the pan-European FTSEurofirst 300 off 0.6 percent, although a rise in Asian shares earlier in the global day kept the MSCI world share index near its highest since May 2011. China's promising economic growth forecast for 2013 raised expectations for robust demand for fuel and industrial commodities, underpinning oil prices. Brent crude oil reached its highest level in three and a half months as it passed $115 a barrel. It last traded at $115.06. U.S. light sweet crude oil rose 44 cents, or 0.45 percent, to $98.01 per barrel.