Gold and silver both seem to have arrested their falls over the last week, with both sitting squarely on top of their 200-day moving averages. The almost relentless dollar strengthening since mid-September has pretty much every opposing currency weaker, and that has had a follow through to metals across the board.

Friday's job number was (according to Fed mouthpiece Jon Hilsenrath) just weak enough to ensure no November hike can take place, but December is still clearly the base case. Whoever had one rate hike for 2016 in their Fed pool is sitting pretty right now, but it could still get derailed in the unlikely event of some disaster data. It feels pretty inevitable at this point, though, and rate hike expectations have their way of becoming self-fulfilling prophecy.

Bull Case

  • We've reset the table, scrubbed out most of the quick money spec length, and you can argue the uptrend from July 2015 is still in place, though threatened.
  • ETFs have actually net added ounces every day since the top. Impressive resilience, really.
  • Almost all of the crazy call skew is gone from the options market. There are still plenty of bag holders for the long-dated lottery tickets, but at least their marks seem to be rational.
  • A December hike is likely to be the only one this year if it happens, and that will mark just the second hike (and really a half-hike at that) since 2004. I don't own any wine that old.
  • 200 DMA for both gold and silver held so far. It's also still slightly upsloping, so momentum's back is not broken.
  • EFPs have come almost all the way back toward fair value, and GoFo has come in as well. Another tick for less irrational exuberance.
  • Still trillions of dollars in negative yields for sovereigns, and gold now may look like a comparative value.
  • Gold is actually oversold here with a 14-day RSI of 25.

Bear Case

  • A hike is coming, everything is fine — equities still near highs, etc.
  • If dollar strength breaks through resist at 97.5-98 or U.S. rates continue their (small) ascent, the dollar flow out of metals may overwhelm.
  • Simply put, commodities and currencies tend to overcorrect if anything as stops get triggered and investor interest wanes. She's a fickle rock.
  • Most Fed speakers are singing in harmony now, and consensus for a December FOMC hike is growing. Probabilities for an immediate follow in February or March are still low though.

Chart 1

Rates — some perspective. Shaded line is the upper bound for fed target rate. Been a long time since we had a meaningful hiking cycle, and we don't really have excitement that one is about to begin in earnest without getting knocked off the rails (especially without fiscal stimulus in the states).

Even the global weighted average yields (green) and U.S. 10-year (yellow), which have garnered lots of attention for their turns of late, are still near cyclic lows.

Chart 2

Jeffrey Gundlach's recession indicator was triggered Friday. File under "it's different this time," but Bond King 2.0 Gundlach has a favorite recession indicator that he says is pretty accurate over history: When the U-3 unemployment rate (5 percent) crosses the 12-month moving average, it's usually time for at least a garden-variety recession.

The scary bit is whether we have the ability to deal with one at these levels because of weak confidence and the massive amounts of monetary stimulus already deployed. To be clear, there isn't really any other data pointing in this direction, but the core theory makes sense: When you stop improving the rate of employment gains, you at least get a couple quarters of slight negative growth.

Gundlach has also been pounding the "sell everything" table with Nikita Khrushchev's shoe for a couple of months. Macro calls are difficult ...

Bonus Chart

Though gold prices have taken a shelling, it's actually not as bad as you might otherwise expect given other inputs. As you can see in the shaded line, gold's uptrend from last summer is still in place (if delicately), and spot prices are only off 8 percent versus our cash futures proxy being down net 13 percent.

There are some stable hands after all, and much of it has come from the ETF. I suspect net aggregate central bank demand.

Coin Toss

The 200 DMA seems to be holding here, and demand for both metals across the desk has picked up a bit. With vols and EFPs no longer in the way, the probability is weighted toward a rally. If we break the $1,250 level, the next target is probably $1,222 and then the $1,200 low from our late May bottom.

A strong dollar move or higher rates could certainly knock us lower, but the bias seems for higher in the interim.