PRECIOUS-Gold softens as dollar rebounds from lows

* 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. [ID:nLF651040]

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.