(Reuters) - Gold fell to a three-month low on Thursday as prices were weighed down by a firm dollar, while investors remained cautious ahead of an important Italian bond auction later in the day. The dollar index .DXY traded steady after surging in the previous session, as investors grew increasingly nervous over the Italian bond auction scheduled on Thursday even after a strong sale of short-term bonds. Worries that the euro zone debt crisis was spinning out of control have depressed the financial markets in the past few months. Even gold, seen as a safe haven during economic woes, has succumbed to the gloom. Cash gold was headed for a quarterly fall of more than 4 percent, its first quarter in the red in three years. It was on course for an annual rise of 9 percent, after two years marked by growth rates higher than 20 percent. "Gold is still up on the year and there are relatively few markets moving in the positive territory," said Nick Trevethan, Senior Commodity Strategist at ANZ. "People close their profitable positions to cash out before the year-end." Spot gold dropped 0.7 percent to a three-month low of $1,543.79 an ounce, before recovering to $1,547.80 by 0731 GMT. It was headed for a more than 11 percent decline in December -- biggest monthly loss in more than three years. U.S. gold fell as much as 1.2 percent to a three-month low of $1,545, and trimmed some losses to $1,549.70. Technical analysis suggested spot gold could drop to $1,542 an ounce during the day, said Reuters market analyst Wang Tao. Spot silver dropped 1.2 percent to a three-month low of $26.71, after prices fell more than 5 percent in the previous session. It traded at $26.88, on course for a monthly fall of 18 percent and a third consecutive quarter of losses. The gold-silver ratio rose to 57.77, its highest since November 2010. SINGAPORE, HONG KONG PREMIUMS STEADY; JAPAN SALES SPREE The 2.5-percent drop in gold prices in the previous session failed to impress Asia's physical buyers, who have mostly moved to the sidelines of the market as they wait for the new year. "Many clients are closing for the year already," said a Singapore-based dealer. "But supply is hard to come by and we are struggling to get supply for the beginning of next year." Premiums in Singapore were quoted in a range of $1 to $1.50, steady from a week earlier, and around $2 in Hong Kong, dealers said. Supply shortage due to refinery closures at the year-end, but not high demand, is to blame for the high premiums, they added. "The current price is not very attractive for buyers, who hope that the euro zone situation will further pressure prices," said a Hong Kong-based dealer, adding that $1,500 would attract much physical buying interest. In Tokyo, gold investors rushed to bullion houses to cash out on their gold bars or swap them for coins, despite a sharp drop in prices, before a new tax law requiring bullion retailers to report physical gold and platinum transactions exceeding 2 million yen kicks in on January 1. Spot platinum lost more than 2 percent to a two-year low of $1,349.25, and recovered slightly to $1,355.24. The metal, mainly used in jewelry and autocatalysts, was headed for a 23-percent decline on the year, the worst performer in the precious metals complex.

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