Gold and silver prices plummeted this week on a spike in the value of the U.S. dollar.
For the five trading days ending Thursday, Aug. 14, the U.S. dollar index gained 2.85% against the basket of major currencies. Over the same period gold cast off 7.61% of its luster while the sliver meltdown sliced off 12.50%.
Pulling back a bit, we can see that the U.S. dollar bottomed in mid-March. At that time, gold topped out at $1,032.70 with silver at $21.36 per ounce. With gold falling 33.62% and silver falling 21.89% from their highs, these two precious metals have entered bear market territory.
Gold and Silver in Bear Market
In this new bear market, the average precious metals fund we track lost 6.09% for the week ending Thursday, Aug. 14. At the same time, the benchmark Philadelphia Gold & Silver Index of mining shares shed 5.64%.
But this week, the worst-performing funds in this sector are not the mining shares that are usually more volatile than the underlying metal. This time the price movements of gold and silver outpaced the mining companies that still should still be profitable at the relatively high current spot prices for the metals.
Leading the losers with double-digit losses, the
iShares Silver Trust
, off 12.51%;
PowerShares DB Silver Fund
, down 12.19%; and the
E-TRACS UBS Bloomberg CMCI Silver ETN
sliding 10.67%, all track the bullion price of silver.
Only two funds on the best-performing precious-metals list this week managed to gain ground. They bucked the trend of imploding commodity prices on weaker expected economic demand.
iPath Dow Jones-AIG Nickel Total Return Sub-Index ETN
added 2.01% for the week. This roughly corresponds to the 1.81% increase in the spot price of nickel on the London Mercantile Exchange to $19,088 per metric ton.
The only other precious-metals fund avoiding a loss is the
Gabelli Global Gold Natural Resources & Income Trust
hovering at a positive return of 0.36%. The appreciation in fund's 36% allocation to oil & gas stocks balanced out the depreciation of the 60% of fund assets invested in mining shares.
Even with spot platinum prices down 5.36%, two of the fund's holdings of Johannesburg platinum miners
( INPUY) and
rose 12.02% and 3.05% respectively on rumblings of impending takeover bids from
For an explanation of our ratings,
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.