* Trade thin ahead of key events in Europe, year-end * Australia cuts rates to lowest in 19 months * Coming up: Greek parliament vote on 2012 austerity budget (Updates prices) By Rujun Shen SINGAPORE, Dec 6 (Reuters) - U.S. gold fell 1 percent and spot gold lost half a percent on Tuesday in thin trade, as fears of a possible credit rating downgrade for euro zone nations by Standard & Poor's weighed. The ratings agency announced the warning just as leaders of France and Germany agreed a master plan involving treaty change to impose budget discipline across the euro zone, ahead of a key European Union summit on Friday. Lack of swift action on the two-year-old euro zone debt crisis would not only split up the 17-nation single currency bloc, but also endanger the global economy. Australia's central bank cut interest rates by a quarter point to 4.25 percent on Tuesday as tamer inflation at home allowed it to take out some policy insurance against the debt crisis engulfing Europe. Traders said the rate cut was mostly priced in, and the big concern in the market is tight credit as a consequence of the recent market turmoil. "A lot of impact from credit downgrades in Europe, which seems to get worse rather than better, is that credit is getting more and more restricted to commercial counterparties," said a Singapoare-based trader. "The result is that hedge funds are not able to get the same type of funding as they did before." Spot gold eased half a percent to $1,713.30 an ounce by 0726 GMT, extending a 1.4 percent drop in the previous session. It traded below the 100-day moving average at $1,726.33, which it broke below in the previous session. U.S. gold shed 1 percent to $1,717.70. Investors will also be watching an European Central Bank meeting on Thursday, with hopes the ECB will move more aggressively to calm the turbulent bond market in the euro zone. "The two far-reaching events later this week combined with the year-end factor -- it's a recipe for thin trade and potentially volatile trade," said Nick Trevethan, senior commodities strategist at ANZ in Singapore. Many traders have closed books to lock in profit before the end of the year, reducing liquidity in the market and increasing the volatility. PHYSICAL TRADING THIN; PARTICIPANTS AWAIT DIRECTION Trading in Asia's bullion market remained thin as well, as the volatility and lack of clear direction deterred buyers. "The market is very slow, and we don't see much demand from Thailand, Indonesia or even India," said a Singapore-based dealer. "The weak rupee in India has pushed up buying costs a lot and effectively stopped buyers." The premium on gold bars in Singapore remained around $1 an ounce over spot prices, the dealer added. "While the volatility in the market persists, physical market players will remain aloof and shy, waiting for things to settle down and clear direction to come out before they re-enter the market," said Trevethan of ANZ. Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, stayed unchanged at 1,297.929 tonnes by Dec. 5, just below a nearly four-month high of 1,298.534 tonnes hit on Nov. 30. Precious metals prices 0726 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1713.30 -8.19 -0.48 20.70 Spot Silver 31.91 -0.11 -0.34 3.40 Spot Platinum 1511.74 -4.75 -0.31 -14.47 Spot Palladium 626.55 -3.67 -0.58 -21.63 COMEX GOLD FEB2 1717.70 -16.80 -0.97 20.85 18468 COMEX SILVER MAR2 31.98 -0.39 -1.21 3.36 2321 Euro/Dollar 1.3346 Dollar/Yen 77.67 TOCOM prices in yen per gram. Spot prices in $ per ounce. COMEX gold and silver contracts show the most active months

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