* Gold up after 3-percent drop over 7 sessions * But could break below $1,300 before Friday jobs report -analysts * Physical demand soft, Indian premiums halve By Clara Denina LONDON, Nov 6 (Reuters) - Gold advanced on Wednesday, halting its longest losing streak in nearly six months as the dollar fell on continued talks of extending the lifespan of the U.S. Federal Reserve's stimulus. Comments from Fed policymaker John Williams who said the central bank should wait for stronger evidence of growth momentum before trimming bond-buying helped balance out a surprisingly strong U.S. service sector report on Tuesday. The timing of any tapering of the Fed's $85 billion in monthly bond purchases has been a key factor driving gold prices this year. The metal has lost a fifth of its value so far on fears the Fed would start cutting back its stimulus. Recent mixed economic data, however, has cast doubts over the real strength of the U.S. economy, leaving markets to speculate whether the Fed would act before year-end. Spot gold was up 0.5 percent at $1,317.35 an ounce by 1051 GMT. The metal had dropped 3 percent over the past seven sessions and analysts see it still vulnerable to break below the $1,300 mark if U.S. data shows a pick-up in the economy. Comex gold futures for December rose $9.20 to $1,317.30 an ounce. Volumes have been very low over the past few sessions and investors are expected to remain cautious ahead of the non-farm payrolls report on Friday, which could give more clues on the state of the U.S. economy and the future of the Fed's stimulus. "The non-farm payrolls are coming on Friday and tomorrow we have the ECB and the BoE meetings on interest rates," MKS SA head of trading Afshin Nabavi said. "Markets are a little bit hesitant, waiting for some kind of direction ... gold seems to have found support at $1,306, while $1,321 is a good resistance level." The euro rose against the dollar as investors waited to find out what steps the European Central Bank (ECB) might signal at its policy meeting on Thursday. "The ECB is expected to keep rates on hold, but the relative dollar strength against the single currency is still important to keep an eye on as far as bullion is concerned," VTB Capital said in a note. SLOW PHYSICAL DEMAND On the physical side, demand has failed to pick up robustly, as traders await for clearer price direction. "Physical demand is quietening down and people are hoping to buy at cheaper levels in the Far East, where there is interest but no orders yet," Nabavi from MKS said. Gold premiums in India halved on Tuesday from last week because of unusually muted demand during the festival season and as supply was set to improve after some importing agencies began purchasing for domestic use. Spot silver rose 1.3 percent to $21.92 an ounce. Spot platinum gained 0.6 percent to $1,456.20 an ounce and spot palladium rose to its highest level since Aug. 19 at $759.75 an ounce earlier in the day.

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