NEW YORK (TheStreet) -- No investment goes straight up or down for very long. The commodity rally ran out of gas this week in a sharp pullback.
The dip is bringing back the buyers looking to hold commodities, which tend to do well during the early phases of an economic recovery.
For the week ending Thursday, Aug. 20, the average commodity fund we track dropped 4.2%. , excluding inverse funds and the energy funds I
The worst-performing commodity fund this week is
ProShares Ultra Silver
. It tumbled 15%. This double-leveraged exchange traded fund follows 200% of the daily performance of silver.
Two other funds tracking silver,
PowerShares DB Silver Fund
, down 7.6%, and
ETFS Silver Trust
, down 7.4%, also made the list of the 10 worst-performing commodity funds.
The declines were slightly worse than the 7.3% drop in the spot price of silver. With stockpiles of silver at COMEX-monitored warehouses contracting by 194,552 ounces to 117.4 million troy ounces in the four days ending Aug. 19 and worldwide industrial demand expected to return, look for silver to return to rally mode.
The second-worst performing fund this week is the
PowerShares DB Base Metals Double Long ETN
, which melted down by 12%. The underlying index weightings are 39% zinc, 38% copper and 23% aluminum, which slid 5.7%, 5.2%, and 7.7%, respectively, in the past five trading days.
Three narrowly focused exchange traded notes did worse than their targeted commodity.
iPath Dow Jones-UBS Aluminum Subindex Total Return ETN
lost 9.6%. Nickel spot on the London Metal Exchange dove 8.1%, and the corresponding fund,
iPath Dow Jones-UBS Nickel Subindex Total Return ETN
, plunged 9.4%.
Likewise, as cotton bales were crushed by 8.1%, the
iPath Dow Jones-UBS Cotton Subindex Total Return ETN
shed 8.3%. China is experiencing sluggish export demand for textiles and garments, although the U.S. dollar value of these exports did increase 21% from June to July.
New Chinese domestic consumption and a return of U.S., European and Japanese consumers bode well for underlying cotton prices as well as other commodities in the months ahead.
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Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.