* U.S. GDP miss puts downward pressure on stocks * Fed's statement awaited for clues on asset-buying program * Euro climbs, bund futures tick lower * Gold climbs on weaker dollar NEW YORK, Jan 30 (Reuters) - U.S. economic contraction in the fourth quarter bolstered expectations the Federal Reserve will continue its easy monetary policy at the end of a meeting later on Wednesday, keeping the euro near a 14-month peak against the dollar and gold higher. The central bank is expected to maintain asset buying at $85 billion a month when it concludes its policy meeting and stick to its commitment to hold interest rates near zero until unemployment falls to at least 6.5 percent from the current 7.8 percent. GDP data, which showed the world's largest economy in the fourth quarter unexpectedly suffered its first decline since the 2007-09 recession, bolstered 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. The 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. "This is a source of weakness for the dollar because it takes away the narrative that the U.S. economy is performing better than the rest of the world," said Joe Manimbo, senior market analyst at Western Union Business Solutions. There had been optimism earlier in the day after several encouraging reports on the European economy that caused the euro to break above $1.35 for the first time since December 2011. The euro was last at $1.3570. Expectations of easy U.S. monetary policy added to the attractiveness of the euro. 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. The euro's rise against the dollar was also good for bullion, with spot gold prices up $16.21, or 0.97 percent, to $1679.60. CONFIDENCE RALLY The focus of the Fed decision will be on its outlook for the economy and its bond buying program after it sounded slightly more hawkish last month. The benchmark 10-year U.S. Treasury note was down 6/32, the yield at 2.019 percent. Bund futures fell 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. "This is one chink in the armor of the recent better-than-expected economic indicators. This will make people start to get wary," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. "If it turns out (Superstorm) Sandy and the 'fiscal cliff' were the reasons for (the contraction), people will shrug it off." The Dow Jones industrial average edged up 6.81 points, or 0.05 percent, at 13,961.23. The Standard & Poor's 500 Index was down 0.13 points, or 0.01 percent, at 1,507.71. The Nasdaq Composite Index was up 1.93 points, or 0.06 percent, at 3,155.59. 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 a 21-month high. 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 $114.68. U.S. light sweet crude oil rose 20 cents, or 0.2 percent, to $97.77 per barrel.