Gold bars are displayed at South Africa's Rand Refinery, in this file photo. (REUTERS/Siphiwe Sibeko)

SINGAPORE - Gold edged lower on Wednesday, tracking falls in industrial metals and equities, as concerns about global economic growth weighed on market sentiment amid thin year-end trading volumes.

Investors were cautious as the latest data out of the United States sent mixed signals. Improving labour market conditions lifted consumer confidence to an eight-month high in December, but persistently weak house prices remain an obstacle to faster economic growth.

Industrial metals, along with equities, eased in thin holiday trade.

"There have been a couple of positive signs on the U.S. economy, but it's hard to be hung up on them too much," said a Singapore-based trader.

"The economic prospects are so dire that it seems to have taken people's appetite away from commodities, especially in industrial metals, late in this calendar year."

Although gold traditionally has a safe haven appeal, the euro zone debt crisis is threatening the global economy, causing a liquidity shortage in markets and forcing investors to abandon their gold positions to cover losses elsewhere.

Spot gold edged down 0.3 percent to $1,588.29 an ounce by 0307 GMT, on course for a third consecutive session of losses.

U.S. gold also inched down 0.3 percent to $1,590.50.

Technical analysis suggested that spot gold could fall to $1,596 during the day, said Reuters market analyst Wang Tao.

Investors are watching Italy's final bond auctions of the year this week. Italian government bond yields edged higher on Tuesday and were expected to rise further with investors growing nervous that thin liquidity may complicate Rome's plans to sell 8.5 billion euros worth of debt on Thursday.

Asia's physical market remained lacklustre in the final week of the year, as market participants have largely moved to the sidelines, with premiums steady in Singapore and Hong Kong, dealers said.

"There is not too much activity as prices circle around $1,600 level," said Ronald Leung, a physical dealer at Lee Cheong Gold Dealers in Hong Kong, but added that buying from China had been steady.

Chinese authorities said they have banned gold exchanges outside of the two in Shanghai, after small gold trading platforms sprouted all over the country during a gold rush among Chinese investors.

China should buy gold to further diversify and protect its foreign exchange reserves, the head of research at China's central bank said.