(REUTERS) -- Gold fell on Wednesday, tracking industrial metals and equities lower, as concerns about global economic growth and Iran's threat to stop the flow of oil kept investors on the sidelines.

Latest data out of the United States sent mixed signals on the health of the world's largest economy. Improving labor market conditions lifted consumer confidence to an eight-month high in December, but persistently weak house prices remain an obstacle to faster economic growth.

Spot gold was down 0.5 percent at $1,585.70 an ounce by 0933 GMT, on course for a third consecutive session of losses. U.S. gold fell 0.6 percent to $1,586.40.

Iran's threat put world shares on the back foot, and industrial metals eased in thin holiday trade.

Gold is still tightly correlated with equities markets, but also risk aversion is not at the levels we saw in early August when gold de-coupled from everything else and traded with the dollar, VTB Capital analyst Andrey Kryuchenkov said

It's more uncertainty than outright panic selling, he added.

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.

The dollar was almost flat against a basket of currencies, with the euro hovering around an 11-month low against the U.S. currency.

A stronger dollar often encourages non-U.S. holders of gold to sell the metal to lock in a higher profit in their own currencies.

Technical analysis suggested that spot gold could fall to $1,569 during the day, Reuters market analyst Wang Tao said.

Italian debt auctions this week are also making investors nervous.

Italian government bond yields edged higher on Tuesday and were expected to rise further with concerns that thin liquidity may complicate Rome's plans to sell $11 billion worth of debt on Thursday.

Asia's physical market was lackluster in the final week of the year, with premiums steady in Singapore and Hong Kong, dealers said.

There is not too much activity as prices circle around the $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.