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Metals Review

By Warren Bevan      Printer Friendly Version
Aug 18 2008 2:16PM

Another week, another waterfall decline in precious metals. This week I am looking at the three year chart to get an idea of where support may fall since all shorter term charts are useless after the falls.

I received another flood of worried emails this week and for good reason. But I remain a staunch supporter of this bull market. Fundamentals are stellar and just keep getting better, but technically we have a lot of damage to repair.

I hope, pray and expect that Friday was the lowest print we will ever see again in all four precious metals I cover here. At least the sun is shining outside. I think everyone needs to enjoy the summer and not worry about the day to day violent gyrations. As one subscriber suggested, go steelhead fishing, although the salmon is much more plentiful this time of year here, I may take his advice. The metals will go higher, so we all have to regroup and enjoy the show. Oh, how the stories from this one will shock future generations.

Gold was hammered most of the week with Friday culminating in another huge down day to settle the price below the important $800 mark. Technically the good news is the last Fibonacci retracement line lies here. The bad news is that if it’s broken we could run down to $735, then to $700. After that $650 would be the target. As always I am a bull and expect prices to go up this week, they can’t go down for another one...I hope. Another proprietary indicator I use is the Warren’s vacation index. As happened last year when I went on vacation the sub-prime crisis hit in full swing. I stepped off a houseboat having no communication with the outside world, to a different world in which the ramifications will continue to be felt for years. I spent the rest of the holiday trying to find out what was going on, secretly, while still assuming a straight face. The signs are pointing to another financial or geopolitical event so expect something similar and gold should be the beneficiary. My proprietary index is rarely wrong!

All three moving averages are still heading higher but losing momentum. The 100 day moving average coincides with the long term uptrend line and will be a major area of support. RSI, MACD and Slow STO are all bearish. We’d better find some support here pretty quick or the summer low is going to end up being a multi-year low.

Silver lost over 15% this week and it hurt. Dealers are running low on inventory as the price dropped. Both gold and silver are being hoarded or just not available as a result of the low prices. The paper futures are setting the price but the physical sellers are simply not willing to abide. We may soon have two prices a futures price and a physical price with a spread of many dollars.

$12.30 is the last Fibonacci support area on the three year chart and will be strong support but that doesn’t mean we can run below it. I have been amazed at how far and fast gold and silver have fallen for no apparent reason recently. For more on this I suggest you research what GATA has to say since they are the experts in this field.

All three moving averages are heading higher but weakening. RSI, MACD and Slow STO are bearish and very oversold.

Platinum continued its rout falling 11% on the week. We are now below levels not seen since almost a year ago. Support is strong from here all the way to $1,100 with multiple bands of support. Miners are taking advantage of these low prices and trying to take over some good companies on the cheap. Fundamentals remain strong but corrections do need to occur but this one is mean.

All three moving averages are moving up but weakening and all three indicators, RSI MACD and Slow STO are bearish with Slow STO showing a sign of a possible rest and base building not too far off.

Palladium has not been at this level since June 2006, and that was brief. The fundamental reasons to own palladium are sound and improving weekly while the technical reason have been weak, but at these levels the case can certainly be made that prices can’t go much lower and the deals are here.

All three moving averages are dead flat and ready to move lower. RSI, MACD and Slow STO are lower than any other period on this three year chart. Technically we are close to a bottom but as they say, markets can remain irrational, longer than you or I can remain solvent.

Well that’s all from me as we enjoy our second sunny weekend of the summer, maybe third, and I prepare for a much needed vacation. The next newsletter is scheduled for the September 6th weekend unless something extraordinary occurs. I wish you a great end to your summer.


Warren Bevan



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