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Metals and mining funds were dragged down this week on concern the recession may be deeper than previously expected. In contrast, gold and silver funds became safe havens.
As for commodities, aluminum fell 5% in the five trading days ending Thursday, May 14, while copper dropped 9.3%, lead slumped 5.4% and nickel declined 6.3%. Tin and zinc also decreased in value.
The worst-performing metals and mining fund for the period,
PowerShares DB Base Metals Long ETN
, indexed to metals prices, gave up 8.5% of its value.
Market Vectors -- Steel Index Fund
ranks as the second-worst performer. Its holding of
Cliffs Natural Resources
cratered 27% as the company slashed its dividend and announced a share dilution with an equity offering.
AK Steel Holding
plunged 13%, saying weak demand from the U.S. auto industry may force it to idle its Kentucky steel plant and lay off 750 workers for the rest of the year.
The weekly reading of steel production at 1.02 million tons is 53% below the year-earlier level, with mills running at 42.9% of capacity. U.S. plate steel prices have fallen $10 in a week and $72 in four weeks to about $594 per short ton.
The largest American aluminum smelter,
, a holding of the third-worst performing
SPDR S&P Metals & Mining ETF
, declined 11.3%. The fund retreated 7.6%. Global oversupply of aluminum was made worse for Alcoa, with Chinese producers restarting 1.4 million metric tons of idled capacity last month.
The two bright spots this week were gold and silver, rising 1.7% and 1.5%, respectively, as stores of value were sought as the stock market slipped lower.
GAMCO Gold Fund
rose 5.4%. Its largest holding, accounting for more than 12% of assets is
, which gained 13%. The fund's second-largest holding, at 9% of assets, is
, which climbed 12%. The top-performing holding,
, jumped 40% as the index that tracks the cost of the 25 best-quality diamonds of each color added another $11 to $6,650 this week.
The next-best gold fund,
Van Eck International Investors Gold Fund
, returned 5.2% as Canadian companies
each increased 23%, and
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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.