FSJG Index™ Review
by Frank Barbera
May 7, 2007

General Comments

It was a mildly positive week for the metals sector, as an early bout of weakness was reversed near weeks end with some solid buying on Thursday and Friday. For the week, the Yellow Metal gained .8% or $5.90 the ounce to finish at $690.70, up from last weeks close of $684.80. Elsewhere Silver was uninspired in its action ending at 13.40, down .10 from $13.50/oz last week, while Platinum shined gaining $32/oz to end at $1316, up from $1284.00. At $1316, nearby Platinum is threatening to break out above key resistance at the May 2006 high near $1320, which if achieved would be the first major breakout to new highs within the Precious Metals sector. 

 With the late week ‘about-face’ in metals prices, mining stocks perked up aided by a bullish announcement from Barrick Gold (ABX), that it is discontinuing its hedging program on a going forward basis, and unwinding more of its hedges. When Barrick acquired Placer Dome last year, it acquired a considerable hedge book with Placer which Barrick is continuing to unwind, taking a large 1^st quarter charge this year in excess of $500 million to eliminate a large portion of existing hedges. Over the last few years, the market has shunned ABX shares which have remained below the specter of a huge hedge book and impossible to comprehend terms, all of which made investors uncertain as to whether ABX was a gold mining company or a mismanaged hedge fund in disguise. In the case of ABX, and its well deserved years of ‘pariah’ status, there is probably no extreme of hedge book “transparency” that the company could go to, that would be ‘too far’ to help investors regain confidence in Barrick badly tarnished shares (Peter Munk’s colorful protestations notwithstanding). At least, this week some investors plunged back in ABX which far and away was responsible for the XAU’s gains on the week. To that end, the 6.64% gain in ABX stock from $28.59 to $30.49, helped lift the XAU to a weekly gain of 2.14 index points, or 1.53% ending the week at 141.86 up from 139.73. For the AMEX Gold Bugs Index, the HUI, which has been blessed to not have Barrick’s lagging shares as part of the index, this week the HUI lagged behind, edging higher by just 1.08 from a close last week of 344.83, to a close of 345.91. 

Financial Sense Junior Gold Mining Index Comments

For the FSO Junior Mining Index, the strength in Gold provided these depressed issues with a solid lift, the index ending the week at 318.84 up 7.40 index points or 2.37% from last weeks close of 311.44. On Friday, the FSO Junior Mining Index of 40 small cap issues ended back above the 50 day average at 314.43, and remains well above the 200 day average at 270.97. Among the Sub-Indices, only the Junior Producer segment ended the week with a loss, with that index slipping from last weeks close of 341.33 to reading this Friday of 340.53, a loss of .80. On the week, the Junior Producers still managed to end the week above the 50 day average at 339.68, and the 200 day average at 298.89.

Among the other Sub-Indices, the Junior Development Index showed signs of life with a gain of 2.25%, or 15.47 index points to close at 701.68, up from 686.21. Friday’s close saw the index finish below the 50 day average at 706.86, but above the 200 day average at 663.74. Finally, the Junior Exploration stocks continued to be the 2007 performance champs, with the Exploration Index ending higher by 4.23%, a gain of 7.73 index points to end at 189.98, up from 182.25 last week. For the Exploration Index, the 50 day average ended at 182.91, with the 200 day average at 144.21. The Exploration Index is now within easy striking distance of new highs.

That’s all for now,

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.