Financial Sense Junior Gold Mining Index Review by Frank Barbera 08/11/2008

General Comments

What an extraordinary week. The US Dollar surged by 3.39% gaining 2.49 index points to close at 75.85, the highest close seen since February 20th, 2008. For the Dollar, the weekly gain of better then 3%, was only the 19th time in its traded history in which the Dollar Index has been able advance by 3% or more in a single week. That history for the US Dollar Index goes back to March 28th,1975 and encompasses a period of 1,742 trading weeks over a period of 33 years. In the last 14 years, there have been only two other instances when the US Dollar gained 3% or more in a given week, one in January 2005, the week ended 1/7/05 with a gain of 3.39% and the other, the week ending 3/16/01, with a gain of 3.44%. Needless to say, for Precious Metals a rising Dollar is akin to a dose of hemlock, with all precious metals prices wilting badly on the week. In assessing the damage, we observe that spot Gold fell $54.20 to close at $855.35, down 5.96% for the week, while Spot Silver fell $2.34 to close at $15.29, down 13.42% on the week. Platinum continued its unprecedented swan dive, falling another $99.00, that’s on top of last weeks $100 loss, to end at $1552, down 6% for the week.

With the extreme weakness in precious metals, Gold mining stocks fell off the cliff, with the XAU posting a weekly decline of 11.12%, following in the wake of 6.33% decline in the prior week. For the HUI, the Amex Gold Bugs Index, the week produced a sell off measuring 14.73% which represents the third largest weekly decline ever seen in the history of that particular index which was started in 1996. For the XAU, 10% declines have taken place 29 times in the last 30 years going back to 2-15-80, a time period measuring 1,487 weeks. In the same period of time, there have been only 8 weeks measuring a decline more then 15%, with the three largest declining weeks as follows: A decline of 21.83% in July 26, 2002, a decline of 19.64% during the week of the 1987 stock market crash 10/23/87, and a decline of 17.73% in the week of June 18th, 1982. Clearly, we are looking at data points that will still have historical importance, when viewed several months from now.

Not surprisingly, Junior Miners also had a terrible week, with the FSO Junior Mining Index falling an additional 9.02% to end the week at 190.59, down 18.90 index points from the prior week close of 209.50. Looking back, this was the third worst weekly percentage decline for the FSO Index this year, with the index losing 10.15% the week ended 3/20/08 and losing 9.11% the week ended 1/18/08. In the 6 years since then index was created, this weeks decline of 9.3% ranks as the 6th worst week behind the decline of 9.11% the week of 1/18/08, -10.15% 3/20/08, -15.00% the week of 817.07, -10.82% the week of 9/15/06 and –16.67% the week ended 5/22/06.

For the FSO Junior Mining Index, the 50 day average ended at 219.17, with the 200 day average ending at 253.90.