FSJG Index™ Weekly Review
by Frank Barbera
March 17, 2006

General Comments

Rising optimism that the U.S. Federal Reserve could soon be near an end to its elongated campaign of rising interest rates set the tone for all of the capital markets during the week just past. During the week, short-term interest rate futures experienced one of their largest rallies in several years with 6-month forward Fed Funds taking the implied Fed Funds Rate from near 5.25% to under 5%. On the long end of the curve, both 10 and 30-year Bond yields - after several weeks of heavy selling - left those markets oversold.

Not surprisingly, one of the primary victims of this week's sharp interest rate decline was the debt-laden U.S. Dollar, which crumbled by 2.12%, suffering its second worst weekly decline of 2006. True to past prologue, the tumbling Dollar sparked a surge in Gold prices, which gained $12.00 to close at $554.80, a gain of … you guessed it, 2.21% (nearly the inverse of the Dollar decline).

With Senior Gold Stock Indices coming into the week fairly depressed, having sold off in three of the prior five weeks, it was also no surprise to see the major gold indices revive on the heals of firmer bullion. Tensions with Iran continued to mount and also underpinned both Bullion and Energy prices. At week’s end, the XAU was higher by +4.91 to close at 131.72, a gain of 3.87%, while the HUI added 9.45 index points to close at 302.02, a gain of 3.22%.

Financial Sense Junior Gold Index

With Senior Gold Stocks back in rally mode, the Financial Sense Junior Gold Index (FSJG) attempted to move higher. By week’s end, the FSJG closed at 259.70, up 7.49 index points from last week's close of 252.21. On Friday the 50-day average closed at 237.11 with the 200-day average ending at 176.18.

Within the realm of the sub-indices, we find that the FS Junior Producers Index ended at 260.43, up 1.52 index points from last week’s close of 258.91. On Friday the 50-day average closed at 252.08 with the 200-day average ending at 194.22. Within the sub-indices, this week's star performer was the Junior Development Index, which surged 5.22% from a reading of 708.56 last week to a close this week of 745.58. Sporting a nearly 37-point gain, the Junior Development Index ended above the 50-day average at 676.27 and the 200-day average at 503.25.

Finally, the Junior Exploration Index turned in another solid week, ending higher by 4.78 index points or 3.75% to close at 132.09, up from 127.31 the prior week. For the Exploration Index, the 50-day average ended at 110.80 with the 200-day average at 77.00. Interestingly, new highs in the Exploration and Development Indices todate have not been confirmed by higher highs in the Producers.

The McClellan Summation Index for Junior Gold Stocks ended the week at 1228.56. This was below its signal line at 1263.00 and down from last week's close of 1252.78. Closer in, the Short-Term oriented McClellan Oscillator ended neutral at a reading of +28.68 and is neither overbought (above +150) or oversold (below –150). That said, it is worth noting that higher highs in the FS Junior Gold Index have been accompanied by a series of lower highs on the McClellan Oscillator over the last few weeks. This suggests, but does not guarantee, that a correction could be in the offing as the rally in small caps appears to be thinning out.

*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.