* Equity markets rally on economic growth signs

* Prices head for biggest annual drop since 1981

* Premiums inch up in Hong Kong, steady in Singapore

(Updates throughout, changes dateline from SINGAPORE)

By Clara Denina

LONDON, Dec 27 (Reuters) - Gold steadied in thin holiday trade on Friday, supported by some physical buying yet remained on track for its biggest annual loss in three decades as rallies in equities and prospects of a global economic recovery dented its appeal.

Optimism that the U.S. economy can stand on its own as monetary stimulus is withdrawn was buoyed by data on Thursday showing a decrease in weekly jobless claims which propelled stock markets higher.

Germany's benchmark index DAX .GDAXI hit a record high, taking its cue from all-time closing highs on Wall Street and gains in Asia, while U.S. treasuries yields US10YT=RR edged above 3 percent for the first time since September.

"The market is really focusing on this pick-up in economic growth that we continue to see in the United States," Saxo Bank senior manager Ole Hansen said.

"If growth is the key driver as we start the year, that doesn't give much upside potential to gold, which is usually considered a safe haven."

Gold XAU= was flat at $1,210.60 by 1032 GMT, while U.S. gold futures GCcv1 for February delivery edged down 0.2 percent to $1,209.90 an ounce.

Prices should hold in a range between $1,190 and $1,220 an ounce over the next few sessions, with moves likely to be exacerbated by a lack of liquidity during the year-end holiday, traders at MKS Capital said.

Bullion fell to a six-month low of $1,185.10 last week after the Fed said it would begin tapering its $85 billion in monthly bond purchases next month, before recovering slightly.

BIGGEST ANNUAL DECLINE IN 32 YEARS

Gold is headed for a near 30 percent slump in 2013, ending a 12-year rally prompted by rock bottom interest rates and measures taken by global central banks to prop up the economy, which encouraged investors to put their money in non-interest-bearing assets such as gold.

This year's decline is set to be gold's biggest since 1981, while current prices are 37 percent below an all-time high of $1,920.30 hit in 2011.

As a gauge of investor interest, holdings in the SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund, fell 0.19 percent to 804.22 tonnes on Thursday from 805.72 tonnes on Tuesday, the weakest since 2009. GOL/ETF

Physical buying from Chinese consumers edged up on Friday, but demand from Indonesia and Thailand has eased in recent weeks due to their weak currencies. ID:nL3N0K604G

Premiums for gold bars inched up to a high of $2 an ounce above spot London prices in Hong Kong, up from $1.50 last week as dealers awaited the arrival of fresh supply from Europe next month.

Premiums in Singapore, a centre for bullion trading in Southeast Asia, were steady at $1.50 an ounce.

In other precious metals, silver XAG= rose 0.5 percent to $19.81 an ounce, having posted its biggest daily gain for two weeks, up 1.9 percent, on Thursday. Silver is down 35 percent this year in its worst annual performance since at least 1982.

Spot platinum XPT= was up 0.4 percent to $1,360.20 an ounce, after rising the most since mid-October in the previous session. Spot palladium XPD= rose 1 percent to $703.50 an ounce.

(Additional reporting by Lewa Pardomuan in Singapore; editing by Jason Neely)

((clara.denina@thomsonreuters.com)(+44 207 542 9420)(Reuters Messaging: clara.denina.thomsonreuters.com@reuters.net))

Keywords: MARKETS PRECIOUS/