Financial Sense Junior Gold Mining Index Review by Frank Barbera 08/27/2007

General Comments

It was a solid recovery week for the Natural Resource sector and the broad stock market indices, as last weeks Fed action seems to have granted the markets at least a modest reprieve from the maelstrom which has been the mortgage market credit debacle. For the widely watched S&P 500, the week yielded a gain of 33.43 index points or 2.31%, with the S&P ending at 1479.37, up from the prior weeks close of 1445.94. The recovery in the broad market, led buyers to move back into the badly beaten resource sector, where Gold gained $10.55 the ounce, or 1.60%, to finish the week at $667.90, up from $657.35. For Spot Silver, prices edged higher by $.29 cents the ounce to finish at $11.96, up from $11.71, a gain of 2.13% on the week. Finally, spot Platinum prices ended higher by $19/oz or 1.54% to finish at $1245.00, up from $1226.00/oz. The recovery in metals prices helped the major Gold Indices move higher with the XAU leading the charge, gaining 9.91 index points or 7.66% to close at 139.27, up from 129.36. The XAU was helped mightily by heavyweight component Freeport McMoran Copper and Gold, which gained $10.23 on the week, with FCX more of a Copper-Base Metal company, then a true gold miner. As a result, the XAU has tended to exaggerate the real movement in the gold and silver mining stocks both up and down. For its account, the HUI or Amex Gold Bugs Index performed well, gaining 18.27 index points or 5.96% on the week to close at 324.65, up from 306.38. These gains were in line with other sector related indices such as the “GDX” – Gold Miners ETF, which is an unweighted measure of Gold Stocks that ended higher by 5.42%.

Nevertheless, while the large cap miners benefited from the recovery in the S&P, it appears as though ongoing liquidity concerns held back the gains in small cap miners which had a devastating decline the prior week. After falling 43.31 index points in the week ended 8/17, a loss of 14.76% in one week, the FSO Junior Mining Index recovered this week by just 1.71 index points, or .68%. On Friday, the FSO Junior Mining Index closed at 251.72, up from 250.01, but still ended below the 50 day average at 292.32, and well below the 200 day average at 294.37. Among the Sub-Indices, it was a mixed showing with the Junior Producer Index, the star of the week rebounding by 12.62 index points to close at 251.51, up 5.28% from last weeks close of 238.89. For the Junior Producer Index, the Friday close of 251.51 was below the 50 day average at 291.20, and below the 200 day average at 315.22. For the Junior Development Index, the week produced a knee-jerk bounce that saw the index end Friday at a close of 477.64, up 9.72 from last weeks close of 467.92. On Friday, the Junior Development Index ended below the 50 day average at 565.05, and below the 200 day average at 648.38. While both the Producer and Development Indices gained ground on the week, the Junior Exploration Index remained week, as buyers continued a tepid approach to the smallest cap issues where sizeable bids were less abundant. On the week, the FSO Junior Exploration Index ended down by 4.10 index points, for a loss of 2.32% to close at 171.90, down from 176.00, the prior week. On Friday, the close of 171.90 for the Exploration Index left this barometer below its 50 day average at 197.81, and below the 200 day average at 174.98.

Financial Sense Junior Gold Index™

Mining Index

Financial Sense Junior Gold Index™

Producer Index

Financial Sense Junior Gold Index™

Development Companies

Financial Sense Junior Gold Index™

Exploration Companies

In the table above, we show all of the weekly closes for each of the indices covering the time period of the last few weeks along with data for the pertinent 50 day and 200 day moving averages. As can be seen by the related index charts, the down market of the last few weeks has been especially tough on Juniors where the Relative Strength Ratio versus larger cap mines has been solidly in corrective mode. While some investors may be discouraged by the recent decline in small cap issues, on the technical front we can report that on many indicators the sector is now massively oversold. While this does NOT necessarily mean that a final price low is in place, it does mean that there is a good chance a more important final low could develop in the weeks ahead. Typically, more important final lows tend to follow a number of weeks AFTER the absolute oversold extremes, so, while the picture maybe painted a shade of dark gray right now, there is a good chance that the colors will be lightening up a few weeks down the line. Always a gradual, if now slow process, for now, the best thing to do is watch and wait for additional signs of more important accumulation to begin in the sector as we move forward in the weeks ahead.

An important key will be the onset of positive divergences which develop as price move to lower lows and indicators begin to show less downside selling pressure.

Financial Sense Junior Gold Index™

The Relative Strength Ratio of
Small Cap Miners to Large Cap Miners

Financial Sense Junior Gold Index™

The Summation Index for Junior Gold Stocks

Financial Sense Junior Gold Index™

The Medium Term Up-to-Down
Volume Ratio for Junior Golds

Financial Sense Junior Gold Index™

The Medium Term ARMS Index for Junior
Golds, at record oversold values

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.