* Dollar firms as stock slide dents risk appetite
* SPDR gold ETF holdings decline 0.1 pct; Indian demand down
* ETF Securities London palladium ETC holdings hit record
(Updates throughout, changes dateline from TOKYO)
By Jan Harvey
LONDON, Oct 22 (Reuters) - Gold prices softened in Europe on
Thursday as a decline in the equity markets dented appetite for
risk, benefiting the dollar at the expense of higher-yielding
currencies and lifting it from 14-month lows against the euro.
A sharp fall in risk appetite, as seen in the first quarter
of 2009, tends to lift gold, which is often seen as a safe store
of value. But lower risk aversion has mainly benefited the
dollar at gold's expense. []
Gold is more expensive for non-U.S. investors and less
attractive as an alternative asset as the dollar firms.
Spot gold <XAU=> was bid at $1,054.45 an ounce at 0940 GMT
against $1,058.35 late in New York on Wednesday. U.S. gold
futures for December delivery <GCZ9> on the COMEX division of
the New York Mercantile Exchange fell $9.20 to $1,055.30.
Societe Generale analyst David Wilson said given gold's weak
underlying fundamentals, its rally to record highs of $1,070.40
last week and its continued strength are difficult to justify.
"When you look at the inflation outlook, the U.S. bond
market is not factoring in any inflation for a while," he said.
"The key driver is going to remain exchange rates. They have
been the driver of the smaller moves, though in terms of the
bigger moves, there have been some more technical issues there."
The dollar rose broadly, bouncing back from a 14-month low
against the euro <EUR=> and a basket of six currencies <.DXY>,
as a slide in global share prices blunted risk appetite and put
the brakes on a rally in higher-risk currencies. []
European shares fell 1.3 percent, tracking losses on Wall
Street on Wednesday, as worse than expected quarterly results
from Ericsson <ERICb.ST> sparked profit taking. []
SLACK DEMAND
Demand for physical gold remained slack, with jewellery
buying tailing off in major consumer India after last week's
festival period, with a decline in the rupee making
dollar-priced assets more expensive. []
"Post-Diwali, demand has turned slack," said a dealer with a
bullion-dealing bank.
The world's largest gold exchange-traded fund, the SPDR Gold
Trust <GLD>, also reported an outflow on Wednesday. Its holdings
fell nearly 40,000 ounces or 0.1 percent.
"Speculator interest is slowly easing, while physical demand
concerns are as ever present at record high prices," said VTB
Capital analyst Andrey Kryuchenkov in a note.
Among other precious metals, silver <XAG=> was bid at $17.45
an ounce against $17.66 late on Wednesday, tracking losses in
gold. Platinum <XPT=> was at $1,356.50 an ounce against $1,359.
The world's biggest platinum producer, Anglo Platinum
<AMSJ.J>, said its third-quarter production of refined platinum
fell 9.9 percent from last year. []
Lonmin <LMI.L>, the world's third-largest platinum miner,
said its metal output fell 6 percent in the year to Sept., but
chief executive Ian Farmer was positive on prices.
[]
"Jewellery demand and investment demand have been very
helpful to us and very solid, and hopefully that will continue,
he told Reuters in an interview.
"But I think the growth area will be industrial demand as it
starts to come back over the course of the next 18 months."
Palladium <XPD=> bucked the trend to rise 0.45 percent. At
0940 GMT it was bid at $334 against $332.50, lifted by fears
over the outlook for Russian and South African supply and hopes
for a recovery in automotive demand.
Platinum and palladium are primarily bought by the car
industry for use in catalytic converters.
But investment demand for the metal also remains strong. ETF
Securities said holdings of its London palladium exchange-traded
commodity rose nearly 9,000 ounces on Wednesday to record highs
just below 550,000 ounces. []
(Additional reporting by Julie Crust; Editing by Sue Thomas)
