Gold ETF has strongest start of any ETF but does it really have the gold?

Section:

By Kevin Plumberg
Reuters
Thursday, December 30, 2004

http://www.reuters.com/financeNewsArticle.jhtml?
type=businessNews&storyID=7209753

NEW YORK -- The dollar dipped to an all-time low against
the euro on Thursday for the sixth consecutive session, as
traders took aim at technical targets in a thin market.

Many foreign exchange desks had skeleton crews, but
traders who were around pushed the U.S. currency broadly
lower, positioning themselves for further declines next year
on the back of a weaker-than-expected index of business
activity in the U.S. Midwest.

"People want to go into the weekend and the new year
positioned for a weaker buck, which is the way that it has
been pretty much since the election," said Tim Mazanec,
director of foreign exchange with Investors Bank and
Trust in Boston.

By early afternoon, the euro eased to $1.3645 after rising
to a new high of $1.3667, according to Reuters data. An
options barrier was broken at $1.3650, which triggered
stop-loss orders above that level.

Against the Japanese yen the dollar lost 0.7 percent
compared with late prices in the prior New York session
to 103.00 yen and was down 0.2 percent at 1.1309
Swiss francs.

Sterling was up 0.4 percent at $1.9254.

The euro also traded at a record high against the yen
on Thursday, hitting 141.61 yen, according to Reuters
data. But partly prompted by the Chicago PMI
numbers, it subsequently retreated over a full yen, in
line with dollar/yen's slide, traders said.

The Chicago purchasing managers index fell to 61.2 in
December from 65.2 in November, below economists'
forecasts of a 63.0 reading.

The dollar had been trading slightly higher against
some currencies before the data were released. But
the decline in the headline number -- and a weak
employment component, which showed contraction in
the labor market -- was enough to push the dollar back
down across the board.

"The headline was weaker than expected," said Todd
Elmer, currency strategist at Barclays Capital in New
York. "The dollar's reaction was consistent with what
we've seen for the past couple of months. On a
stronger number, we buy dollars and send it up about
30 or 40 pips. Then it gets sold off again. On a weaker
number, traders just go straight at it."

The Chicago PMI, specifically the 49.1 reading for
employment, which showed a fall in hiring, pushed
Treasury prices higher and yields lower.

As traders cleared off their desks ready to ring in the
new year, the dollar was on track for a dismal fourth
quarter. The U.S. currency shed 10 percent against
the euro and Swiss franc in the last three months.

Against the yen, the dollar fell around 7 percent in
the quarter.

In absence of any convincing sign of a substantial
rebound in the greenback, traders added to their bets
against the currency going into 2005.

"If anyone is out there looking for a correction in the
dollar, it just hasn't happened and there's no sign
that it's going to happen in the upcoming days," said
Investors Bank and Trust's Mazanec.

Nevertheless some analysts see the euro holding
relatively steady, and even slipping a bit, in the first
quarter of 2005.

UBS, one of the largest participants in the currency
market, predicts the euro will end the first quarter at
$1.36.

"While the new year may see renewed appetite to
rebuild dollar short positions, we expect notable early
February event risk to keep dollar downside in check,"
the bank said in a note to clients.

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