Paul Tustain: Cash futures, physical forwards, and London gold's '100-to-1' leverage


9:59p ET Wednesday, April 21, 2010

Dear Friend of GATA and Gold:

The founder and CEO of gold dealer Bullion Vault, Paul Tustain, tonight offers a tepid defense of the London gold market that mischaracterizes GATA's recent comments about it.

Tustain begins: "Some commentators are alarmed that the amount of 'physical' gold in London is not sufficient to meet the immediate demands of the market." But "immediate demands" is not really what GATA has said. GATA has said that the London gold market is a fractional-reserve gold banking operation that sells a lot more gold than there is. That market so far does indeed seem to have fulfilled its "immediate demands," but it has done this in large part by deceiving buyers all over the world into thinking that it could fulfill all its purported obligations in metal.

But at least Tustain acknowledges that what calls itself the London "physical" market is not well-named and is actually a promisory market. Tustain also acknowledges that in the gold market, as in many futures markets, "it is quite likely that there is some price 'manipulation' of futures contracts at expiry," manipulation masterminded by market professionals. (GATA would connect those market professionals to investment banks that have special confidential relationships with the U.S. Federal Reserve and Treasury Department and the Bank of England.)

Tustain discourages investors from playing in gold futures markets such as the London "physical" market. Of course GATA does too and wishes Tustain and Bullion Vault and all dealers in real metal every success in getting it into the hands of people everywhere who aspire to be free of the bankocracy.

A friend tonight surmises that the "physical" gold market in London consists largely of people who really can't buy a certain amount at a certain price on a certain date and, on the other side, people who really couldn't provide that certain amount for that certain price on a certain date if enough buyers were ever serious and not mere speculators who can't easily be stomped at any moment by monster investment banks backstopped by monster central banks.

This is what, for the time being, respectable economists call "price discovery." GATA continues to work on that.

Tustain's essay is headlined "Cash Futures, Physical Forwards, and London Gold's '100-to-1 Leverage'" and you can find it at GoldSeek here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Prophecy Resource Corp. Appoints Rob McEwen to Advisory Board

Prophecy Resource Corp. (TSX.V: PCY, OTC: PCYRF) is pleased to announce the appointment of Rob McEwen to the company's Advisory Board. McEwen is a leading Canadian mining industry entrepreneur. He is the chairman and CEO of U.S. Gold Corp. and Minera Andes Inc. McEwen was the founder and former chairman and CEO of Goldcorp Inc., whose Red Lake Mine in northwestern Ontario, Canada, is considered to be the richest gold mine in the world. During his tenure at Goldcorp, McEwen transformed the company from a collection of small companies into a mining powerhouse, growing its market capitalization from $50 million to approximately $8 billion.

For Prophecy Resource Corp.'s complete statement:

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Preliminary Feasibility Study Completed for Seabridge Gold's KSM Project

Study Reports Reserves of 30.2 Million Oz. Gold, 7 Billion Lbs. Copper,
133 Million Oz Silver, 210 Million Lbs. Molybdenum

Base Case Life of Mine Cash Operating Costs Estimated at $144/oz. Gold Produced
(Net of Base Metal Credits)

Toronto -- Seabridge Gold Inc. has announced results from a National Instrument 43-101 compliant preliminary feasibility study of its 100-percent owned KSM project in northern British Columbia, Canada. The study was prepared by Wardrop, a Tetra Tech company, a major international engineering and consulting firm.

Seabridge President and CEO Rudi Fronk says, "The study confirms that the KSM project now hosts the largest gold reserve in Canada and one of the largest in the world. KSM is projected to provide an extraordinary mine life of more than 35 years with estimated cash operating costs well below the current average of the major gold producers. Estimated capital costs are in line with those of comparable, large-scale, undeveloped gold-copper projects and KSM has the advantage of being located in a low-risk jurisdiction."

For the complete Seabridge Gold statement: