In this issue:

Gordon Brown: Housing Bubble? What Housing Bubble?

Rothschild Leaving Gold Trading and London Gold Fix


From Volume 3, Issue Number 18 of Electronic Intelligence Weekly, Published May 4, 2004

World Economic News

Gordon Brown: Housing Bubble? What Housing Bubble?

Speaking at the spring meeting of the International Monetary Fund in Washington, D.C., British Chancellor of the Exchequer Gordon Brown addressed the gigantic housing bubble in Britain, by babbling, "While house prices have certainly risen, as everybody knows, what is also the case is that people's debt servicing payments, mortgage payments as a share of their income, are still far lower than they were 10 years ago."

The IMF had just warned in its annual World Economic Outlook that a fall in housing prices in Britain was the single biggest threat to the country's economy. British fund manager Tony Dye and others had weighed in on the subject, and were covered extensively in the British press.

According to BBC News April 25, a survey released April 19 reported the reality that Brown cannot stand: the average price of a home in Britain has risen to 184,582 pounds ($325,000) a 50% rise from the start of 2002.

Rothschild Leaving Gold Trading and London Gold Fix

N.M. Rothschild & Sons is withdrawing from commodities trading, including gold, and will be withdrawing from the twice-daily London Gold Fixing, the bank said in an April 14 regulatory announcement. Rothschild has hosted and chaired the gold-fix meetings since 1919, and has been a player in the gold market for two centuries. Rothschild is the last of the London gold pool banks to remain independent; the rest were all swallowed up by big banks, such that the group now includes Deutsche Bank, HSBC, Scotia Bank of Canada, and Société Générale. Any replacement for Rothschild in the pool must be a market-making member of the London Bullion Market Association, and the likely suspects include AIG, Barclays, Goldman Sach's J Aron, JP Morgan Chase, and UBS, according to wire reports.

In March, European central banks reached an agreement under which they may sell up to 500 million tons a year of gold between them, up from the 400-ton limit agreed to in 1999.

Taken together, these developments suggest that the gold carry trade and the gold derivatives market may be ready to blow.

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