By Harpreet Bhal LONDON, Nov 15 (Reuters) - Gold slipped 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 regarded as a safe haven asset to shield investors in times of uncertainty, it has increasingly become prone to pressure from sell-offs in the wider financial market, moving in tandem with other risky assets as investor sentiment remains fragile. Spot gold fell 0.5 percent to $1,771 from $1,779.89 late in New York on Monday, having earlier traded as low as $1,760.04 an ounce. Italian bond yields rose back above 7 percent and yield spreads of French, Austrian and Belgian 10-year bonds over German Bunds marked euro-era highs, underscoring the challenges facing Europe in containing its debt crisis. Reflecting caution in the market, European shares and base metals fell 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. "Gold is behaving like a risk asset in the short-term and is moving lower with all the other risk assets," Ross Norman of Sharps Pixley said. "It (gold) has had a significant move up on the year and we could be seeing some profit taking as we approach the end of the year." In Italy, Prime Minister-designate Mario Monti met the president after ending talks with Italy's parties, political sources said, in a possible indication he is close to forming a new government. In an indication of the effects of the debt crisis on growth, the 17-nation euro zone economy grew a modest 0.2 percent in the third quarter from the second, lifted by France and Germany, but slowing export growth and stagnating consumer demand point to a likely contraction soon. In the United States, retail sales rose more than expected in October as strong receipts from motor vehicle and building material dealers offset the drag from service stations. U.S. gold fell 0.4 percent to $1,772.30 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," 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." Hedge fund manager and long-time gold bull John Paulson slashed his bullion holdings by a third in the third quarter, data showed, cutting holdings in the SPDR Gold Trust to 20.3 million shares from 31.5 million at the end of the second quarter. Holdings of the largest gold-backed exchange-traded fund (ETF), New York's SPDR Gold Trust dropped 0.03 percent from Friday to Monday, while that of the largest silver-backed ETF, New York's iShares Silver Trust remained unchanged for the same period. 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 edged up 0.2 percent to $34.27 an ounce. Platinum fell 0.5 percent to $1,629.74 an ounce and palladium fell 0.3 percent to $657,97 an ounce. Johnson Matthey Co, the world's top supplier of catalytic converters, said that palladium prices could climb higher and that investors would be net buyers in 2012 after they sold an estimated 215,000 ounces in 2011. (Editing by Alison Birrane)

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