* Euro slips vs dlr, Italy 10-yields back towards 7 pct * Gold seen tracking risky assets in short-term * Coming up: U.S. PPI, retail sales for Oct at 1330 GMT By Harpreet Bhal LONDON, Nov 15 (Reuters) - Gold fell on Tuesday, hit by a sell-off in financial markets and a drop in the euro against the dollar, with persistent doubts about Europe's ability to tackle its growing debt crisis prompting investors to remain cautious. Although gold is supported by its safe-haven allure, it is prone to spillover from any sell-off in the wider financial market as sentiment remains fragile. Spot gold fell 0.8 percent to $1,765.19 an ounce by 0950 GMT from $1,779.89 late in New York on Monday. Italian bond yields rose towards 7 percent and even non-German triple-A rated issuers saw premiums over safe haven Bunds mark new highs, underscoring the challenges facing Europe in containing its debt crisis. Reflecting caution in the market, European shares fell in early trade while the euro slipped against the dollar. A stronger dollar makes commodities priced in the U.S. unit more expensive for holders of other currencies. "Recently gold has been lacking its safe haven qualities and it has been performing in line with other risk assets," Eugen Weinberg, head of research at Commerzbank said. "But in the longer-term it would make sense to look at gold as a hedge against inflation and financial market risks, and as an alternative currency." In Italy, Prime Minister-designate Mario Monti will meet the leaders of Italy's biggest two parties to discuss the "many sacrifices" needed to reverse a collapse in market confidence. A failure by Italy, the euro zone's third-largest economy, to fix its debt problems would have a far bigger impact on the region than difficulties in Greece. The 17-nation euro zone economy grew a modest 0.2 percent in the third quarter from the second, the EU said on Tuesday, lifted by France and Germany, but slowing export growth and stagnating consumer demand point to a likely contraction soon. U.S. gold fell 0.7 percent to $1,766.40 an ounce. Gold hit a record around $1,920 in September on worries about a growing debt crisis in Europe and is trading more than 24 percent higher in the year to date. "It is most likely that bullion would continue in dull trading here with players squaring their book before year-end and little chance of reaching August's all-time highs," VTB Capital analyst Andrey Kryuchenkov said in a note. "We can only see very moderate gains should the broader market push higher, while much would still depend on where the EURUSD heads in the next month." SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported the first dip in its holdings in more than two weeks on Monday -- a fall of 0.388 tonnes from the previous session to 1,268.278 tonnes. A Securities and Exchange Commission filing on Monday showed hedge fund manager John Paulson reduced his exposure to the SPDR Gold Trust, which he has used for his gold share class to hedge currency risk. The filing shows that he now owns 20 million shares, compared with 31.5 million at the end of the second quarter. Money managers, including hedge funds and other large speculators, increased their bullish bets in gold futures and options during the week of Nov. 8, as the price of bullion rallied to a seven-week high above $1,800 an ounce, data showed. In other precious metals, silver slipped 0.9 percent to $33.90 an ounce, while platinum fell 0.8 percent to $1,625.99 an ounce and palladium fell 0.7 percent to $654.97. (Editing by Alison Birrane)

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