The rising value of the U.S. dollar is making precious metal exchange traded funds (ETFs) look a little less appealing.

Gold has now slumped to its lowest price in more than a year, following the government’s takeover of Fannie Mae and Freddie Mac, reports Feiwen Rong for Bloomberg.

The dollar index, meanwhile, rose to a one-year high, boosting the PowerShares DB US Dollar Index Bullish (UUP). UUP and SPDR Gold Trust (GLD) compared:

According to one commodity broker, the markets are torn between investing in gold ahead of the Indian wedding season and those selling gold as a result of the dollar’s strength.

According to ZEAL Speculation and Investment, Indian wedding season tends to cause a rally in gold prices in early October through late November. Families of Indian brides give them wedding gold in the form of 22-karat jewelry. India is the world’s largest consumer of gold, much of it in the form of jewelry, and about 40% of India’s gold demand occurs during this wedding season.

Morgan Stanley seems bearish on precious metals, cutting its price forecasts for both gold and silver. Analysts now say gold may average $900 an ounce in 2008 and $950 next year, down from forecasts of $950 this year and $1,000 next year.

Platinum futures have also fallen, to an 18-month low, and palladium stepped back as the dollar hit an 11-month high against the euro, reports Dave McCombs for Bloomberg. Low demand for autos is blamed, because platinum and palladium are used in emissions systems.

Other ETFs affected include:

• PowerShares DB Gold Double Short ET (DZZ), up 44.8% since Feb. 28
• iShares Silver Trust (SLV), down 18.7% year-to-date
• iPath DJ AIG Platinum TR Sub-Index ETN (PGM), down 31% since July 8 inception
• ELEMENTS MLCX Precious Metals ETN (PMY), down 24.2% since April 4 incpetion

For full disclosure, some of Tom Lydon’s clients own shares of UUP.

Tags: Commodity ETFs, DZZ, GLD, Gold, Palladium, PGM, Platinum, PMY, Precious Metals, Silver, SLV, UUP