The Shocking Truth

*If you have not already subscribed to our weekly interactive newsletter, please visit: http://equedia.com/newsletter/

For the full interactive edition, please CLICK HERE

Before we get started this week, I want to share something that will shock you.

The US now ranks 190th in the World in account balance.

The account balance is a country’s net trade in goods and services, plus net earnings from rents, interest, profits, and dividends, and net transfer payments (such as pension funds and worker remittances) to and from the rest of the world during the period specified.

China ranks number one with a positive balance of $272,500,000,000.

The US? Ranked number 190th in the world with a negative balance of $ -561,000,000,000.

Countries such as Haiti, Kosovo, Uganda, Rwanda, Zimbabwe, and Vietnam all have better balances than the US.

Take a look at the rankings here:

Click Here for Account Balance (1 – 95)

Click Here for Account Balance (96 – 190)

With US debt continuing to climb and interest rates at all time lows, you can see why I continue to be bullish on gold and bearish on the Dollar. Which leads us to a question I get asked a lot: Gold is up big, so why aren’t the producers up higher?

The Difference Between Gold and Gold Producers

It seems logical that as gold prices move up, the big gold producers should make more money. But that isn’t always the case.

Especially now.

Often times, gold moves with the price of oil – especially in a situation where there is risk and tension involved. I hate using the word “war” but the unrest in the Middle East has only gotten worse, leading to a further drain in the worldwide supply of oil.

I’ve always liked oil and gas. It’s a cash flow business and much simpler to value than precious metals or other commodities. It gets used up and once it’s gone, it’s gone.

We are far, far away from any real “green” alternatives. This makes oil the most preciously traded resource.

I have been predicting that oil will hit $100 over the last few months. The growing unrest in the Middle East only adds more fuel to that theory.

While there are many that say these oil prices won’t last, I am not so sure…yet. As long as there is tension in the Middle East, there will be room for oil’s advances. Unless you believe the situation will just disappear, oil prices will remain high.

We know the demand for oil hasn’t changed much. As a matter of fact, given the high price of oil, demand should diminish in an economy that’s trying to pick itself back up – which would lead to lower oil prices. But the fear factor is once again in play. Oil is rising because of fear and risk, and not macro-economic growth.

And that’s what we’re seeing. The overall stock market dropping, as oil rises.

Barclay’s has estimated that one million barrels of oil per day has been shut down from the world as a result Libya. But is that enough to justify the climb in prices? Just as the Greek crisis took oil down, the unrest in the Middle East is forcing it up. So it doesn’t matter if it’s justified – the market plays on perception, not reality.

I expect prices to climb even higher in the short term, and would not be surprised to see $120/barrel. Whether oil remains consistently at those levels in another question, but the fact that oil could hit $120 could have negative consequences. We’ll likely see $105 by the end of next week which should give us another great opportunity to profit from oil’s run like it did in 2008.

But we all remember what happened after the run in 2008, when oil hit $147. How can we forget?

While we can make a lot of money from knowing that oil could reach $120, it wouldn’t be good for the overall economy. It would be downright brutal.

$120 oil is the level that oil as a share of global GDP starts to move above 5.5 per cent of GDP, which has historically been an environment where global growth has come under pressure. We’ve seen this over and over again, with our most current reminder in 2008.

We have seen a major increase in the price of oil in the last two years, and every time we have seen oil prices rise 120 per cent over a two-year period there has been a recession, with the exception of 2006 when the housing boom counteracted the price movement. This time around there won’t be a housing boom to mitigate the effects. And the world knows this.

Saudi Arabia and other OPEC nations have already talked about replacing any lost Libyan oil. But that may actually lead to higher prices in the long term.

Right now, the price of oil is kept in check because there is around 5 – 6 million barrels a day of excess capacity on a global basis, with the majority of this in Saudi Arabia. But if they start to make up for short falls elsewhere, such as Libya, that spare capacity still never drops. That means that oil has to be made up from the overall supply, leading to higher overall prices in the long term.

Although I prefer to say otherwise, the unrest in the Middle East has just gotten started. That means continued high prices for commodities and continued high prices for oil and gas. It’s not rocket science. Whenever there is war, tension, unrest, or whatever word you choose to use, energy, food, and resource prices go up – including gold.

So now we go back to the question. Gold is up big, so why aren’t the producers?

Why have we seen Barrick, Goldcorp, Kinross, Newmont Mining, Agnico-Eagle Mines Ltd., and Yamana Gold Inc. all drop 2-7%, as oil climbs 2%?

Gold producers require a lot of energy to pull the gold out of the ground and energy costs a lot of money. As a matter of fact, the majority of the costs associated with producing gold is energy.

With the tension in the Middle East and the media outlets screaming $200 oil, this puts a very dramatic constraint in the profits for the big producers.

Commodity prices, labour costs, and energy prices are rising around the world. When you have high oil prices and high labour costs, the bottom line for the gold producers drops significantly – even if gold climbs.

Furthermore, big producers are forced to mine for lower grades, as the higher grade ore deposits are running out of steam. That means for every tonne of processed rock, producers are yielding less gold, which leads to less money.

If oil continues its climb or remains at these levels over the coming months, you can be sure that these big producers will have some disappointing quarterlies. For these producers to satisfy shareholders, they’ll need to produce more gold to continue revenue growth. They no longer have the luxury of high gold prices combined with $40-$60 oil, like they did last year. Ultimately, this means exhausting more resources.

So does that mean we should stay away from gold stocks? Nope. In fact, it’s quite the opposite.

The SPDR Gold Trust (NYSE: GLD) and other Gold ETF’s continue to climb forward and companies that aren’t producers are still making a very strong run.

Last week we talked about Kaminak Gold Corporation, ATAC Resources, and Northern Dynasty. Two of them made advances this week while one remained steady, despite oil climbing higher. Why? Why are they climbing when the major producers are falling?

In order for the majors to keep up, they need to produce more – especially with higher oil prices. The market forces these majors to increasingly exhaust resources because every investor wants to see increased revenue.

There are only a few ways a major can increase its value besides having gold prices climb, when energy costs stay consistent. They can either increase production, or acquire other gold properties and add to their reserves.

The majors do not explore. They let the juniors do the work. While they may invest in the exploration programs of the juniors, they rarely get their hands dirty. Their job is to produce as much gold as they can, in the shortest time possible. Because of that, they need to replace their dwindling supply, which means they are always eyeing take over targets. That’s why theres a lot of money being poured into the sector.

Many of the juniors I have spoken with have had little problem financing their projects. The speculative investments from the funds and banks are rising quicker than ever signalling a junior market that is becoming more bullish everyday.

Later this week, we’re going to be skipping our regularly scheduled issue of Equedia Weekly to present an exclusive in-depth report on a junior gold exploration company that:

• has over 5 million+ gold-equivalent ounces
• owns 100% of a brand new gold district
• has target prices from respected analysts nearly double where it trades today
• has a very sophisticated and respected management team
• is an ideal mid-term takeover target
• has an extremely aggressive 2011 drill program planned, nearing 40,000m of drilling
• has millions of dollars in the bank
• and has numerous projects in the works with the majors

It’s going to be a very exciting year for this company and their drills are about to turn. Last year, they drilled out less than 8000m, hit some very big numbers and found new discoveries under a restricted drill program due to obligations with a major. This year, they have free rein and are about to embark on a drill program nearing 40,000m. That’s a big program for any company and it shows the utmost confidence in their project. The details of their drill program should be released later this week.

I can’t wait to share their story.

Until next week,

Ivan Lo
Equedia Weekly

Questions?

Call Us Toll Free: 1-888-EQUEDIA (378-3342)

For the full interactive newsletter and report, please follow this link: http://archive.constantcontact.com/fs005/1102243211822/archive/1104638742477.html

If you have not already subscribed to Equedia Weekly, you may sign up here:http://equedia.com/newsletter/

Forward-Looking Statements

This Newsletter and report contains certain forward-looking statements that may involve a number of risks and uncertainties. Actual events or results could differ materially from current expectations and projections. Except for statements of historical fact relating to the project, certain information contained herein constitutes “forward-looking statements”. Forward-looking statements are frequently characterized by words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate” and other similar words, or statements that certain events or conditions “may” or “will” occur.

Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that statements containing forward looking information will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on statements containing forward looking information. Readers should review the risk factors set out in the Company’s prospectus and the documents incorporated by reference.

Cautionary Note to U.S. Investors Concerning Estimates of Inferred Resources

This presentation uses the term “Inferred Resources”. U.S. investors are advised that while this term is recognized and required by Canadian regulations, the Securities and Exchange Commission does not recognize it. “Inferred Resources” have a great amount of uncertainty as to their existence, and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Resource will ever be upgraded to a higher category. Under Canadian rules, estimates of “Inferred Resources” may not form the basis of feasibility or other economic studies. U.S. investors are also cautioned not to assume that all or any part of an “Inferred Mineral Resource” exists, or is economically or legally mineable.

Disclaimer and Disclosure

Disclaimer and Disclosure Equedia.com & Equedia Network Corporation bears no liability for losses and/or damages arising from the use of this newsletter or any third party content provided herein. Equedia.com is an online financial newsletter owned by Equedia Network Corporation. We are focused on researching small-cap and large-cap public companies. Our past performance does not guarantee future results. Information in this report has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. This material is not an offer to sell or a solicitation of an offer to buy any securities or commodities.

Equedia.com has been compensated to perform research on specific companies and therefore information should not be construed as unbiased. Each contract varies in duration, services performed and compensation received. Equedia.com is not responsible for any claims made by any of the mentioned companies or third party content providers. You should independently investigate and fully understand all risks before investing. We are not a registered broker-dealer or financial advisor. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Any decision to purchase or sell as a result of the opinions expressed in this report OR ON Equedia.com will be the full responsibility of the person authorizing such transaction.

Please view our privacy policy and disclaimer to view our full disclosure at http://equedia.com/cms.php/termsr. Our views and opinions regarding the companies within Equedia.com are our own views and are based on information that we have received, which we assumed to be reliable. We do not guarantee that any of the companies will perform as we expect, and any comparisons we have made to other companies may not be valid or come into effect. Equedia.com is paid editorial fees for its writing and the dissemination of material and the companies featured do not have to meet any specific financial criteria. The companies represented by Equedia.com are typically development-stage companies that pose a much higher risk to investors. When investing in speculative stocks of this nature, it is possible to lose your entire investment over time. Statements included in this newsletter may contain forward looking statements, including the Company’s intentions, forecasts, plans or other matters that haven’t yet occurred. Such statements involve a number of risks and uncertainties. Further information on potential factors that may affect, delay or prevent such forward looking statements from coming to fruition can be found in their specific Financial reports. Equedia Network Corporation is a distributor (and not a publisher) of content supplied by third parties and Subscribers. Accordingly, Equedia Network Corporation has no more editorial control over such content than does a public library, bookstore, or newsstand. Any opinions, advice, statements, services, offers, or other information or content expressed or made available by third parties, including information providers, Subscribers or any other user of the Equedia Network Corporation Network of Sites, are those of the respective author(s) or distributor(s) and not of Equedia Network Corporation. Neither Equedia Network Corporation nor any third-party provider of information guarantees the accuracy, completeness, or usefulness of any content, nor its merchantability or fitness for any particular purpose.