Precious Metals ETFs Offer Safe Havens

In a staggering move, the Federal Government gave insurance giant AIG an $85 billion lifeline Tuesday night, taking an 80% stake in the firm and helping it escape (at least for now) a fate Bear Stearns, Merrill Lynch (MER) and Lehman Brothers (LEH) could not.

But that deal has far from smoothed out the crisis that has wreaked havoc on the world's financial markets the last year. Indeed, on Wednesday traders moved on to another potential group of problem companies: Washington Mutual (WM), Morgan Stanley (MS), Goldman Sachs (GS) and various other financial players that seemed to be tumbling lower. CBNC took to running their tickers and deflated stocks prices in bright orange on the television screen the entire session.

It was difficult to discern which companies were genuinely in trouble and which ones were being unfairly pushed down. In an effort to weed out any sketchy trading that could hasten the situation, the SEC was considering tightening rules on short selling.

Meanwhile, countries across the world scrambled to inject billions of dollars into their ailing banking systems. For example, Russia halted stock trading for a second straight day and injected $44 billion into its three largest financial institutions.

All that overshadowed a dramatic rise in the price of some commodities. Oil and precious metals can offer safe havens during tough economic times. On Wednesday oil increased almost $6 a barrel to $96.50 level; gold had its single biggest gain in history.

The Dow Jones Industrial Average was down over 300 points midday, recovered to around a 200-point deficit before a late-day surge caused it to close down 449 points to 10,609.

Gold jumped $89 an ounce to $869, a record-breaking gain. That jump directly translated into a big day for gold-focused funds. The Market Vectors Gold Miners ETF (GDX) increased 12.9% and the SPDR Gold Shares fund (GLD) climbed 10.9%. Other precious metals did well as investors looked for safe investments far removed from equity markets. The iShares Silver ETF (SLV) moved up 14.3%.

Morgan Stanley and Goldman Sachs plummeted in heavy trading a day after both firms said they had adequate capital to continue funding their operations. Indeed, it appeared short sellers were preying on the two firms, outweighing any effects of long term holders. The iShares Dow Jones U.S. Broker-Dealers ETF (IAI) dropped 7.9%. The more broad-focused SPDR Select Financials fund (XLF) decreased 9.4%.

Data Mining
Barclays reported that on Monday ETFs accounted for 40% of all equity dollar volume transactions, up from a typical 28% daily average. The company says that translated into $178 billion worth of ETFs trading hands; $32 billion carrying the iShares brand. Financial ETFs were particularly popular. They traded three times the daily average of the previous six months.

Earnings & Conference Calls

Thursday
Carnival Corp., Cintas, ConAgra, FedEx, Oracle, Palm

Economic Data

Thursday
8:30a.m. Initial Jobless Claims
10:00a.m. August Conference Board Leading Indicators
10:00a.m. Sept. Philadelphia Fed. Business Index
10:00a.m. DJ-BTMU Business Barometer

A look at how the industry's most popular ETFs did on Wednesday.