So, I've been dipping back into Wm Morris lately, as part of the research for a Tolkien paper I'm working on, and just finished reading THE WATER OF THE WONDROUS ISLES, one of only two of his medievalist romances I've never read (the other being CHILD CHRISTOPHER & GOLDILIND THE FAIR). I was surprised and delighted to find that it includes a ring of invisibility.
As part of my commentary on the Gollum chapter in MR. BAGGINS, I included a fairly substantial mini-essay on Rings of Invisibility, in which I discussed the five such rings I'd found that predate Tolkien:** one from a philosophical dialogue (Plato's Ring of Gyges), one from a medieval romance (Lunete's Ring in Chretien, which also appears in the Welsh [MABINOGION] and German [Hartmann von Aue] adaptations of Chretien's work), one from a Renaissance parody of medieval romance (Angelica's Ring in Ariosto), one in a French courtly fairy tale (Fenelon's 'The Enchanted Ring'), and one in a Baltic folk tale (Kreutzwald's 'The Dragon of the North').
Of these, I have no doubt that it was Chretien's ring (probably through the MABINOGION version) that is most likely to have been Tolkien's direct source in as far as he might have had one, while Plato's ring probably influenced the more sinister development of the Ring in THE LORD OF THE RINGS. But it was surprising to me to find no such rings in the century or so of fantasy literature that preceded Tolkien.
THE WATER OF THE WONDROUS ISLES  tells the story of a girl stolen by a witch who in addition to becoming the witch's slave befriends a 'wood-woman', or elf. To help her escape from the witch, the elf gives her a magical ring:
"here is a gold finger-ring . . . fashioned as a serpent holding his tail in his mouth; whenso thou goest on this quest, set thou this same ring on the middle finger of thy left hand, and say thou above thy breath at least:
To left and right
Of me be sight
As of the wind!
And nought then shall be seen of thee even by one who standeth close beside. But wear not the ring openly save at such times, or let the witch have sight thereof ever, or she will know that thou hast met me . . . " (page 35)***
After testing the ring, the heroine hides it by sewing it to the inside of her smock, enabling her to keep it safe from the ever-suspicious witch, and thus is able to spy on the witch and learn the spell that empowers the magical boat in which she makes her escape (pages 39-40). But before she can escape, the witch comes across the ring among the heroine's cast off clothes while the latter is swimming, and our heroine has to make a run for it, leaving clothes and ring behind (pages 50-51).
And that's it: the Dragon Ring quickly passes out of the heroine's hands and is never mentioned again, even though she one day comes back, finds the witch dead, and takes up residence herself in the abandoned house where she grew up. Perhaps Tolkien thought it a promising motif that was dropped too soon. In any case, the idea that the ring should be carried with one but not worn, lest an evil creature notice and disaster befall, is suggestive.
*[and this despite having a copy on my shelves for more than twenty years (since WisCon '85), the Adult Fantasy Series edition with an awful cover by Gervasio Gallardo and Introduction by Lin Carter, who despite boasting of his "familiarity with Morris" shows no signs in it of actually having read the work.]
**[I did not discuss one post-Tolkien ring, since it comes in a parody of Tolkien's work in the D&D comic strip FINIEOUS FINGERS (the February 1979 installment, published in THE DRAGON #22 and later  collected in THE FINIEOUS TREASURY page 22). I also omitted mention of a third false ring in the medieval tale VALENTINE & ORSON, when some preliminary research revealed it does not appear in the tale itself but that some scholars claimed such a ring had appeared in lost precursors to the surviving text.]
***[all citations come from Vol. XX of THE COLLECTED WORKS OF WM MORRIS, ed. May Morris (1913); cf page 23 & ff of the Ballantine edition.]
current reading: CHILD CHRISTOPHER AND GOLDILIND THE FAIR