Financial Sense Junior Gold Mining Index Review by Frank Barbera 07/16/2008

General Comments

It was another nightmarish week for the global financial markets with the S&P 500 plunging to the lowest levels seen since mid 2006, with European markets getting hit even harder. In Paris, the CAC-40 ended the week down a striking 5.60%, in positively waterfall downside behaviour for the four week in a row. In just the last four weeks, the CAC is now down 17.58%, ending this week at the lowest level seen since early 2005. Fresh new lows were also seen in the London FTSE, and in the German DAX which ended the week down 3.92% and 3.51% respectively. In the case of the British market, news lows penetrated to levels not seen since late 2005, while so far, the German Bourse has held up slightly better, residing at about an 18 month low. Nevertheless, from a chart perspective, the European Bourses are in awful condition, with the German DAX poised to tumble toward the 5,400 zone, a good distance from this weeks close at 6153.30. A major culprit in the slow motion collapse of European Bourses is the strong Euro, which surged against the Dollar to end the week at 159.49, with the Dollar Index breaking sharply to the downside to close at 71.94, down from 73.07. The Dollar Index is now closing fast on the prior April 2008 lows at 71.20 with a major chart breakdown in the weeks ahead, a distinct possibility.

With the greenback moving back into the doghouse after several weeks of “rally” (what a joke that was, huh?) the price of Gold surged feeding greedily on the Dollar weakness. At the close on Friday, spot Gold finished at $963.70, up 30.35 for the week to close with a gain of 3.25%. Silver prices also moved sharply higher, ending at $18.79, up from $18.20, for a gain of $.59 per ounce of 3.24%. Platinum languished, ending the week up $5.00, to finish at a spot close of $2027.00.
For the Mining stocks, the higher spot metals prices was enough to help the gold stocks shake off the ill affects of a falling stock market. At the close, the XAU Index ended with a gain of 6.20 index points, reversing the prior weeks decline of 5.52 index points to close at a reading of 194.94. For the XAU, the gain totaled 3.28%, which was echoed by other senior mining indies including the HUI up 4.20% and the GDX up 3.35%. In both cases, these indices reversed the entirety of the prior weeks loss and then some. However, the small cap miners remain persona non grata with a non-detectable pulse.

On the week, the FSO Junior Mining Index ended with a close of 223.12, down from last week’s close of 227.35 for a loss of 4.23 index points, or 1.86%. On Friday, the FSO finished below the 50 day average at 226.58, and below the longer range 200 day average at 262.82. Within the realm of the sub-indices, the news was uninspired at best, with the Junior Producer Index ending at 271.05, down from last weeks close at 273.18. The 50 day average ended at 261.63, with the 200 day average at 276.98. Development and Exploration stage companies also ended lower, with the FSO D&E Index ending at 210.40 down from the prior weeks close of 213.59. For the D&E Index, the 50 day average ended at 216.80, with the 200 day average ending at 253.96. Within the D&E Index, the Development stage companies ended at 458.15, up from the prior weeks close of 449.96, with the 50 day average at 459.34, and the 200 day average at 483.96. Exploration phase companies ended at 127.82, down sharply from the prior weeks close of 134.81, with the 50 day average at 135.96, and the 200 day average at 177.30.