Despite a two-day rally in stocks and precious metals, I’m still bearish in the near-term (see my post 8 signs we’re headed for a bear market in stocks for more). One of the biggest indicators that we’re in for a rough patch is the rapid climb in the volatility index (the so-called “fear gauge” for the stock market). The VIX spiked early in August and it’s yet to taper off:

Typically, gold and silver act like hedges against market uncertainty, but the recent turmoil in stocks has me feeling like this isn’t typical market uncertainty. It feels like it could be something worse.

And when things really go south in the markets, there is no true hedge outside of cash. We learned that in 2008 when gold slumped 30 percent from $1,010 to $700 an ounce and silver shed nearly 60 percent from $21 to $9 an ounce.

Of course, history might not repeat itself (despite warnings of a recession from the ECRI). And there are quite a few investors who are still bullish in the near-term for gold and silver prices.

MF Global’s Tom Pawlicki is calling for gold to advance to $1,700 and silver to move toward $33 an ounce in the short-term (per Barron’s). Technical traders argue gold’s still in a four-week-old downtrend (per Kitco). If gold closes both $1,535, expect more selling. If it closes above $1,705, it could be time to get bullish.

For silver, bulls are looking for a close above $33.58 and bears are looking for a close below $26.15 (again per Kitco).

Today’s non-farm payroll report could determine the direction for gold and silver prices for the rest of the month. “Many think (the jobs number) could dash recession expectations or rekindle widespread macro economic uncertainty,” the CME Group said in a statement yesterday (per IBTimes).

It’s clear we seem to be at a turning point in the markets. And that’s evidenced by lower silver price predictions from leading analysts. TD Securities expects silver to average $36.11 per ounce this year and $39 an ounce in 2012 (per ResourceInvestingNews). That’s roughly in line with predictions from Credit Suisse. They expect silver to rise to $33.70 in 2012 and taper off to $30.60 an ounce in 2013. Credit Suisse also points out that another silver price sprint to $50 an ounce appears to be “increasingly unlikely.”

Natixis Commodity Markets sees silver averaging a ho-hum $27.50 an ounce in 2012 on decreased industrial demand, and gold at $1,450 an ounce.

The only thing that has me feeling like we might be near a bottom in silver prices is the fact that no one’s making bold predictions of $100 silver or $250 silver like they were this spring. That only happens when prices are in a strong uptrend, and the lack of bold predictions and media coverage could be the perfect buying opportunity as the precious metals consolidate.

“It would be quite conceivable to see silver test the strong support area at $20, but that gift would really be too much,” writes Warren Bevan at Goldseek. “Already, with this nice decline refiners are struggling or simply can’t keep up with demand.”

Indeed, the only place we’ve really seen increased demand for precious metals is in the physical coin and bar market. Those are investors who are in for the long-haul, though, and that doesn’t necessarily bode well for the short-run.

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