General Comments

Gold, Silver and Platinum all moved lower on the week with Gold notching its third consecutive weekly decline, while both Platinum and Silver ended lower for the 2nd week in a row. On the week, Gold ended down 29.35 dollars per ounce, a loss of 3.31% to close at $855.80 on the spot market, down from $885.15 the prior week. Spot Silver closed at $16.35, down .47 from last weeks close of $16.82, a loss of 2.79%. For Platinum, the week ended with prices moving up definitively off the lows, but still ending the week with a fairly sizeable net loss. For the week, spot Platinum ended at $1895 per ounce, down $56/per ounce for a loss of 2.80%. Not surprisingly, large cap mining stocks were clobbered once again, with the XAU moving lower by 7.00 index points to end the week at 169.06, down from 176.06, a loss of 3.97%. With pervasive weakness in the large caps, Small Cap miners were also lower, with the FSO Junior Mining Index ending at 214.56, down 6.19 index points or 2.80% from last weeks close of 220.75. For the FSO Index, this was the fifth consecutive down week, with the index down 20.74% since the last up week was seen back on April 4th. For the FSO Junior Mining Index, the 50 day average ended at 255.30 while the 200 day average ended at 275.34.

Financial Sense Junior Gold Index™

Mining Index

Above: the FSO Junior Mining Index (40 stocks)

Financial Sense Junior Gold Index™

Producer Index

Above: FSO Junior Producer Index

AAmong the sub-indices, all averages were lower with the Junior Producer Index closing down 5.43 index points, for a loss of 2.28%. On the week, the Junior Producer Index ended at 231.88, down from 237.31 the prior week with the 50 day average at 271.55, and the 200 day average at 279.92. This week, we officially add a new tracking index to our FSO repertoire which is a combination of the FSO Development and the FSO Exploration Index. To compute the index, we divide the Development Index by two and multiple the Exploration Index by 1.5 and then average the two indices. The idea is to illustrate the non-producing companies with one average, encompassing those companies with projects drilled and delineated and on their way to production, along with those companies looking for initial discoveries, and in the earliest phases of exploration. Over the two years we have been doing the FSO Index, we have noticed that with so many companies in the index, and the companies projects moving forward at widely different paces, that sometimes it is difficult to keep up with precisely what stage a given project and/or a companies basket of projects is best characterized at, as often there is a substantive grey area with lots of room for interpretation. Thus, we create this new sub-index in the hope that it is representative of the small cap stocks on the Venture Exchange, and we will be including it from now on.

Financial Sense Junior Gold Index™

Development Companies

Above: FSO Junior Development & Exploration (non-producers)

As can be seen in the chart above, from the high last year at 313.20, the FSO D&E Index fell 33.42% into its recent low at 208.50 on May 1st. With a greater then 30% decline, ironically during a period of time where Gold gained more then 60%, the FSO D&E Index is now all the way back to its June 14th 2006 lows, having made no net gains since January 2006. In January 2006 Gold was trading at $540 per ounce. Amazing! Perhaps even more incredible, we see in the chart below, the FSO D&E Index relative strength ratio versus physical Gold which last week actually hit a more then four year low, ticking down to a reading of .2363, the lowest value seen since July 29th, 2003!!!! Thus, we see a picture of striking under-valuation with the cheapest gold resource companies selling near multi-year lows while the metal remains near multi-decade highs. Question: How long can this anomaly prevail?

Financial Sense Junior Gold Index™

Relative Strength Ratio of D&E Companies vs. Gold

Above: The FSO Junior Exploration Index

Elsewhere, the FSO Junior Development Index ended at 440.80, down 2.75% from last weeks close of 453.27, with the 50 day average at 487.91 and the 200 day average at 493.69.

Financial Sense Junior Gold Index™

Junior Development Index

Above: the FSO Junior Development Index

Exploration stocks also moved lower, the FSO Exploration Index ending at 133.29, down 4.35 index points from last weeks close of 137.64 for a loss of 3.16%. On the week, the 50 day average ended at 167.68, with the 200 day average at 192.18. From the highs seen last October, the FSO Exploration Index is down 44.35%, a reflection of the severe credit crisis which gripped the credit markets and potentially curtailed access to funding for some of the early stage mines. Reduced access to funding implies more equity financing in lieu of debt financing, with equity financing dilutive to existing shareholders.

Financial Sense Junior Gold Index™

Junior Exploration Index

Above: the Junior Exploration Index

That’s all for now,
Frank