Gold edges lower as dollar strengthens to 1 ½-year high

ICE U.S. Dollar Index hits highest level since around June of 2017

Gold prices on Monday were trading slightly lower as a popular gauge of the dollar strengthened to its highest level in more than 17 months, weighing on demand for the precious metal.

December gold GCZ8, -0.21% was down 70 cents, or less than 0.1%, at $1,207.90 an ounce, after posting a weekly drop of 2% on Friday, and marking its lowest finish since Oct. 10. December silver SIZ8, -0.50% slipped by a penny, or 0.1%, at $14.130 an ounce, following a decline of 4% last week.

The ICE U.S. Dollar Index DXY, +0.38% a measure of the U.S. currency against six major rivals, was up 0.5% at 97.346, reflecting its highest level since June of 2017, according to FactSet data. The gauge has climbed about 5.7% year to date, partly boosted by expectations for further tightening by the Federal Reserve.

The Fed is expected to raise rates next month and thrice in 2019. Higher interest rates can boost the dollar and dull demand for dollar-denominated commodities.

“The strengthening of the greenback is hitting gold,” wrote Carlo Alberto De Casa, chief analyst at broker ActivTrades. “Investors are now convinced of another rate hike in couple of weeks, followed by a hawkish 2019. This expectation is adding further pressure on the gold price, which has now fallen below the key level of $1,210, mitigating the positive signals of the last few weeks,” he said.

In other metals trade, January platinum PLF9, -0.09% was trading flat at $860.60 an ounce, while December palladium PAZ8, -0.11% fell 0.7% to $1,089.90 an ounce. December copper HGZ8, +0.24% meanwhile, gained 0.1% at $2.687 a pound.

Among exchange-traded funds, SPDR Gold Shares GLD, -0.42% and the iShares Silver Trust were both trading lower.

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