We've had an incredibly quiet last few sessions since last week's FOMC/BoJ shenanigans, and the resistance of the 50 DMA seems to have held for now around $1,333. As you would expect, implied volatility has pretty well collapsed and 1M gold vols are the lowest since July 2015.

The thing to bear in mind is that other than the heady times of 2008 and 2009, this happens at least once every year, and usually we have been able to find one reason or another to get scared. I'm hopeful it doesn't take until the November elections.

At the risk of perhaps stating the obvious, the only thing that has changed is the rate of change, and most other bullish/bearish indicators remain steadfast.

Bull Case

  • Negative nominal interest rates pervade. Call it about $10 trillion globally among sovereigns.
  • Global yields have taken a really odd and sharp turn lower. Down from 1.45 percent to 1.3 percent. That's a weighted average!
  • Equities and debt have gone positively correlated with both at elevated valuations, safe haven bid may pick up.
  • We are through producer hedging season mostly and somewhat unscathed.
  • ETFs have actually swung back to being a slow consistent bid. Nothing massive and could unwind quick, but it's a steady drip.
  • November election isn't far away, and I don't know anyone who is actually net positive on the prospects.

Bear Case

  • Chinese imports from Hong Kong are down 10-15 percent for August. Eastern demand is generally terrible.
  • Who is the next marginal buyer of metal? The macro and noncore buyers are probably near their risk limits without encouragement from fresh momentum.
  • Though slipping, spec longs are still above any other periods normal levels.
  • GoFo rates are implying massive OTC longs, and banks are choking on metal.
  • U.S. employment data continues to be steady and improving, and shows signs of driving everything else with it.
  • We even had surprisingly better consumer data for what feels like the first time in my professional career.
  • Call skew still pretty steep at around 2v for 15d 3m. That's been consistent all year, but still adds brakes to further upside.

Chart of the Week

It gets better. 30-day realized gold vol has dropped to 10 percent annualized. This happens every year and usually doesn't persist long. Markets are too skittish it would seem to leave asset prices stagnant for long. Perhaps a Fed speaker or two this week can kick the hornet's nest.

Short gamma might be fine, but short vega seems ill-advised. Plain English version: buy some long-dated puts.

Coin Toss

Momentum seems poor, but the $1,305-$1,300 support has been huge. Will require some serious conviction to break, but when it does could get a big whoosh as gamma comes surging back. Lower.