Gold rises on economic optimism, eyes pullback

NEW YORK/LONDON (Reuters) - Gold rose on Wednesday as the dollar slipped against the euro and on strong global manufacturing data, while analysts said profit-taking could pressure the precious metal after its biggest January gain in 32 years.

Bullion followed a Wall Street rally after data showed U.S. manufacturing growth rose to its fastest level in seven months. China's factory sector also expanded, and Germany recorded its first rise in manufacturing output in four months.

Gold was poised for its fifth straight weekly gain, and some analysts said they expected some profit-taking to pressure prices in the near term after an 11 percent rise in January.

"Gold has been up for weeks. It is probably a stretch now and ripe for some profit-taking, but the technical and fundamental factors are not signaling a reversal yet," said George Gero, vice president of RBC Capital Markets.

Spot gold added 0.4 percent at $1,744.16 an ounce by 2:55 p.m. EST (1955 GMT).

U.S. gold futures for April delivery settled up $9.10 at $1,749.50 an ounce. Trading volume was slower than its recent pace and about 70 percent below the 30-day average.

The precious metal's 11 percent rise in January was its largest monthly gain since August. The rally gained pace after the Federal Reserve said last week it would likely keep U.S. interest rates near zero at least until late 2014, and as the euro zone debt crisis showed no sign of abating.

"We are overbought quite significantly ... so there will be some kind of consolidation," said Ole Hansen, senior manager at Saxo Bank.

Gold has risen nearly 15 percent since it hit six-month lows in late December, when it briefly entered a bear market as it retreated from an all-time high above $1,920 an ounce set in September 2011.

U.S. PAYROLLS, EURO IN FOCUS

Peter Fertig, consultant at Quantitative Commodity Research, said gold could extend its rally if Friday's U.S. nonfarm payrolls data does not disappoint.

Holdings of the metal in exchange-traded funds rose by over 650,000 ounces in January, the first month of net inflows in two months.

Silver put on 1.9 percent at $33.77 an ounce. The silver price rose nearly 20 percent in January, its largest monthly rally in nine months.

Less than one year after silver's breathtaking collapse from its record-setting rally, investors are again snapping up coins at an unprecedented pace.

Sales of the American Silver Eagle coins topped 6.1 million ounces in January, near a record 6.4 million ounces set in January 2011, the U.S. Mint website showed.

Platinum and palladium climbed, as PGM investors digested a mixed bag of U.S. auto sales data in January, featuring an increase in Chrysler Group LLC (FIA.MI) and a decline by General Motors Co (GM.N).

Platinum rose 1.7 percent on the day to $1,612.24 an ounce, while palladium gained 1.3 percent to $689.53 an ounce.

(Additional reporting by Harpreet Bhal in London; Editing by David Gregorio and Dale Hudson)