Financial Sense Junior Gold Mining Index Review by Frank Barbera 09/15/2008

General Comments

It was another terrifying week to the downside for Precious Metals investors who have had their hands firmly gripped to the handlebars of this fast moving straight down roller coaster of the last few weeks. With Gold down for what is now 8 of the last 10 weeks, prices moved steadily and relentlessly lower the first four days of the week, with only Friday’s session providing a long overdue respite. With bruised wrists from holding on so long, gold investors looked back at the week to find nearby spot prices down $39.35 per ounce, a loss of 4.90% to close at $763.45, down from $802.80 the prior week. Mercifully, even those horrid figures were an improvement from the worst levels of the week, which had seen spot gold trade down as low as $66.90 with a print low at $735.90, down 8.33%. Spot Silver prices ended down 11.21%, down $1.37 on the week to close at $10.85, down from last weeks close of $12.22. The low for spot Silver was just over $10.00 with a print low of $10.21 per ounce. From the high on March 17th 2008 at $21.19 to this weeks low of $10.21, the price of Silver has now dropped 51.81% in 124 trading sessions or .41% each day. At this rate, Silver would be worth nothing by March of next year. Guess that’s a good indicator that a low is nearby with perhaps the biggest question being, will we see a violent spring back to the upside or a half hearted spring back on the upside? Recent events with AIG, LEH, MER, FNM, FRE, and WM would seem to making the case for a potentially violent reversal ahead in Precious Metals. Of course, that will only be known in the fullness of time.

Financial Sense Junior Gold Index™

Junior Gold Mining Index

Above: Financial SenseJunior Gold Mining Index

On perhaps the most encouraging note of the week, we were heartened to observe that Precious Metals mining stocks, which often tend to turn abit in front of the precious metals themselves, took a huge bounce to the upside during the last three days of the week. For the XAU Index, a loss of 18.92 index points at the weeks low of 110.70 (-14.59%) was trimmed back to a small loss of just 2.52 index points or 1.94% by weeks end. For the HUI, a loss of 47.42 index points at the low of 253.73 (15.74%) was trimmed back to a deficit of just 3.55% or 10.70 index points with the HUI finishing at 290.45. Junior Gold’s also recovered abit in tandem with other mining stocks, but still posted large losses on the week. For the week, the Financial Sense Junior Gold Mining Index ended down 16.66 index points or 10.22% to close at 146.26, down from last weeks close of 162.92. In the table below, we recap closing prices for each of the Financial Sense Gold Indices going back over the last few weeks.

table

For the FSO Junior Mining Index, this weeks close of 146.26 leaves the index below the 50 day average at 193.52 and well below the 200 day average at 238.38. From the all time high at 332.27 on 3/26/07 the index is now down 55.98% in 18 months.

Financial Sense Junior Gold Index™

Junior Producers

Above: Financial Sense Junior Producers

For Junior Producers the week generated a smaller decline of 4.57%, the FSO Junior Producer Index falling by 9.08 index points to close at 189.44, down from 198.52 the prior week. For Junior Producers, the 50 day moving average ended at 234.49, with the 200 day moving average at 262.14. Development stage stocks also tumbled, ending the week down 9.13%, a striking decline of 32.31 index points with the FSO Junior Development Index ending at 318.24, down from 350.55. From its all time high of 798.74 seen on May 9th 2006, this index is now down 60.15% over 29 months.

Financial Sense Junior Gold Index™

Junior Development Producers

Above: The Financial Sense Development Producers

Rounding out the list of FSO Indices, we find that the Exploration Index ended the week down an amazing 15.22%, by far the biggest losses of any category with the FSO Exploration Index down 13.68 index points to close at 75.87 down from 89.85 the prior week. For the Exploration stocks, the 50 day average ended at 111.15, with the 200 day average at 153.18. From its high in October 2007, the Exploration Index is now down 68.27%!!!! Amazing.

Financial Sense Junior Gold Index™

Junior Exploration Index

Above: FSO Junior Exploration Index

Combining Development and Exploration stage companies to achieve an index of non-cash flow generating mining companies, we find that the FSO Dev elopement and Exploration Index, (Non-Producers) ended at 136.46 down 11.97% from last weeks close of 136.46, a loss of 18.56 index points.

Financial Sense Junior Gold Index™

Junior Development & Exploration Index

Above: FSO Junior Development & Exploration Index

For the D&E Index, the decline leaves prices well below the 50 day average at 182.62, and the 200 day average at 229.11. From the high seen in February of 2008, the D&E Index is now down 69%.

Financial Sense Junior Gold Index™

FSO vs. XAU Relative Strength Ratio

Above: Relative Strength Ratio Juniors versus Senior Gold’s
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.