FSJG Index™ Weekly Review
by Frank Barbera
November 4, 2005

General Comments

On Tuesday, the Federal Reserve implemented its 12^th consecutive increase in short-term lending rates; moving the Fed Funds Rate up to 4%. At the same time, longer-term interest rates also moved higher with the 10-Year Treasury closing at a 16-month-high yield of 4.66%. As a result of the upward pressure on interest rates and fears of even higher rates yet to come, it was a difficult week. The Gold market sold off as the U.S. Dollar Index soared to close the week at a new 17-month high. In the process, the nearby Gold contract declined by nearly 17 dollars per ounce to finish at $457.50, down 3.58%.

However, despite the strong reaction in financial markets, there were several hints of a potential silver lining for the precious metals sector. For one thing, Friday’s strong $.08 cent increase in Average Hourly Earnings, which grew by .5% for the month of October, was strongly skewed by a one-time, “event related” end to a labor dispute at Boeing, which moved up the average wage figure. At the same time, the Labor Force Participation rate seen in Friday’s October release shows tremendous slack in the labor market with the industry report breaking down to a roughly 50/50 split between modest job gainers and modest job losers. Clearly, the Friday Jobs report was on balance a sign of a slowing economy, which at the moment is still enduring a strong round of energy supply-related inflationary price pressures. All in all, stagflation appears to be alive and well and that is a bullish backdrop for Precious Metals.

In addition, despite the negative week for Gold, the XAU was down only $.95, while the HUI was down just .36. In addition, within the XAU, NEM fell 1.55 or 3.54%, while ABX fell 2.28 pts or 8.38%, both of these leading stocks declining in the wake of Monday’s ABX bid for PDG. Remember that Barrick and Newmont account for nearly 50% of the XAU, weighing in at a much higher level than Placer. As a result, one could argue that the indices would have actually gained ground for the week, had the take-over bid for PDG not taken place. All in all, the point here is that Senior Golds showed good relative strength versus the Bullion, -- always a good sign.

Financial Sense Junior Gold Index

Turning to the Juniors, the Financial Sense Junior Gold Index (FSJG) ended the week at 158.65 and actually gained 3.17 index points for the week or 2.03% improving over last week's close of 155.48. On Friday, the FSJG close of 158.65 left the index just below the 50-day average at 159.66, but still well above the 200-day average at 155.38. Within the sub-components, the Junior Producers Index ended at 174.21, up from 167.59 for a gain of 6.62 or 3.39%, while the Junior Development Index ended at 469.44, up from 468.72. The Junior Exploration Index was only modestly changed, ending at 66.12, up from 65.18.

Finally, I note that the Summation Index, medium-term breadth indicator for small cap Golds, ended the week above zero and actually managed to just barely cross above its declining short-term moving average going into the end of the week. Typically, on a technical basis ,this type of bullish cross-over is usually a good leading indicator, which would need additional upside movement early next week to add credence to the signal.

Frank

*Please note that the individual companies in this index are proprietary and will not be disclosed due to compliance and regulatory issues resulting from the relationship of FinancialSense.com, Puplava Financial Services, Inc., Registered Investment Advisor and Puplava Securities, Inc. Member Firm FINRA/SIPC.