FSJG Index™ Weekly Review
by Frank Barbera
May 19, 2006

General Comments

The inevitable correction unfolded once again this week as Gold ended its 9-week winning streak. On the week Comex Gold fell $57 to close at $660.20, down from last week's close of $717 as Gold fell by 8%. For the Gold Stocks, the weakness in the yellow metal translated into the proverbial house of pain with the XAU falling 12.19% on the week and the HUI down 12.74%. From their highs on March 11^th, to the intra-day lows seen on Friday the 19^th, the XAU fell 21.80% in 7 days while the HUI tumbled 23.50% in 7 days.

It's no big surprise that these indices have pulled back given the fact that over the last 12 months, from May 2005 to the high seen in May 2006, the XAU was up 119.56% (from a low of 78.23 on 5/16/05 to a high of 171.71 on 5/11/06) with the HUI up 142.39% from a low of 165.72 in May 2005 to a high of 401.69 in May 2006. In the realm of Gold Stocks, ultra-high volatility is the norm with indices frequently experiencing 40%, 50% and greater gains in relatively short periods of time and subsequently often declining 20% or more fairly rapidly. Bottom Line: This action simply goes with the turf.

During the latter part of the week, many short-term technical gauges for the Gold Stocks were getting substantially oversold, implying something of a rally attempt possible in the early phases of next week. At the same time, this week's broad scale downside momentum buildup will not go away overnight. It strongly implies that after a technical oversold bounce, lower prices will follow in the weeks ahead. Bottom Pickers – caveat emptor.

Financial Sense Junior Gold Index

For the Financial Sense Junior Gold Index, it was a tough week with the index experiencing its largest weekly percentage decline in many years. For the FSJG Index, the weekly decline totaled 15% or 42.25 index points with the index tumbling from last week's close of 280.78 to a close on Friday of 238.53. On Friday, the 50-day moving average ended at 274.03 with the longer range 200-day average at 205.40.

In addition to the steep decline in the FS Junior gold Mining Index, the sub-indices were all sharply lower as well. For the Junior Producers, the week exacted a heavy toll of 16.18% with the index falling from 304.69 last week to a close on Friday of 255.38. The 50-day average ended at 291.70 with the 200-day average at 224.29.

For the Development Stocks, the weekly decline totaled 119.45 index points, a whopping sell off of 15.42% with the index moving from 774.27 last week to a close this Friday of 654.82. The 50-day average ended at 757.70 with the 200-day average at 582.27.

Finally, for the Exploration Stocks, the weekly decline totaled 12.56% with the index falling from 132.67 last week to a close on Friday of 116.00. On Friday, the 50-day average ended at 133.30 with the 200-day average at 92.40. Overall, the FSJG Index is now down 20.37% from its May 9^th high of 298.16 precisely 9 days ago. In addition, the Junior Producer Index is down 21.06% with the Junior Development Index down 21.89% over the same period of time. For the Junior Exploration stocks, which peaked earlier back on April 4^th at 148.45, the total cumulative decline is now 24.27%. Over the next few weeks, it is likely that these indices will remain “on balance” soft, with major support likely found at the rising 200-day averages.

*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.