* Gold eases as investors await direction from Europe * Physical demand in India wanes as prices rise * Lonmin reports 4,000 off work at Marikana mine in SAfrica By Clare Hutchison LONDON, Oct 18 (Reuters) - Gold fell on Thursday as the euro eased versus the dollar ahead of a meeting of euro zone policymakers, after Germany and France clashed over greater European Union control of national budgets and moves towards a single banking supervisor. German Chancellor Angela Merkel opposed giving the European Central Bank new banking supervision powers before a January 2013 target date on Thursday. The single European currency surrendered gains after hitting a session high against the dollar after good demand at an auction of Spanish bonds led to lower yields on Spain's 10-year paper. A dip in stock markets and oil prices also added to pressure on the precious metal. Spot gold fell 0.5 percent on the day to $1,740.50 an ounce by 1300 GMT. U.S. gold futures slipped $11.00 an ounce to $1,742.00. Gold priced in euros eased to its lowest since August 31 at 1,326.42 euros an ounce. Prices of spot gold dipped below $1,730 earlier in the week under the pressure of uncertainty over a bailout plan for Spain and an improvement in U.S. economic data, which triggered concerns about the extent of the latest stimulus measures. "Gold seems to lack a little bit of momentum at the moment. We've seen some firmness, but it's not the big moves that many have forecasted," said Ross Norman, chief executive of bullion brokers Sharps Pixley. "If there was fear, you would buy gold, but there is uncertainty, so people tend to sit on their hands, trying to work out how things play out. The EU summit, the euro and the dollar will be the drivers in the next short period, and the expectations are that if anything comes out of it (the summit), there would be some euro strength and some gold firmness." Norman said physical demand was also weaker than expected for the time of year, when festivals in India and the build-up to Christmas tend to ramp up physical buying. INDIAN DEMAND WANES Demand from gold importers in India appeared to wane on Thursday as a weaker rupee drove up domestic prices in the world's largest gold buyer for the third session in a row. Prices on the most active contract on India's benchmark exchange rose 0.1 percent to 31,173 rupees per 10 grams on Thursday. "Gold is trying to establish a foothold around the mid $1700s as we step into what is traditionally the busy season for gold demand in India," UBS analyst Edel Tully said in a note. "Recently we've noted an improvement in Indian gold buying, but the interest has trailed off since Tuesday to settle about 11 percent below this year's average. The sharp price moves of late likely acted as a deterrent as physical buyers tend to prefer jumping in when prices are stable." Bullion-backed exchange-traded funds took in almost 54,800 ounces on Oct. 17, Reuters data showed. Precious metals largely shrugged off Chinese GDP data that showed a seventh straight quarter of slowdown in July-September to a growth rate of 7.4 percent on the year, as expected. Spot platinum dropped 0.9 percent to $1,643.99, while palladium was down 0.8 percent at $643.47. Platinum producer Lonmin said on Thursday around 4,000 workers at its Marikana mine in South Africa had stayed away from work, again disrupting operations at the site where 34 miners were killed by police in August. But gold miner Gold Fields said 80 percent of workers at its KDC West mine had returned to work by a dismissal deadline, raising hopes that an illegal strike at the operation could end soon. Silver fell 1.1 percent to $32.82, tracking gold. (Additional reporting by Jan Harvey in London and Rujun Shen in Singapore; editing by Jane Baird and William Hardy)

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