After topping the $1,300 level last week, gold looked likely to ride that momentum higher, fueled by the tailwind of the disastrous U.S. jobs report issued May 6.

But that hasn’t happened so far this week. Some unexpected strength in the U.S. dollar, feeding on weakness in the Japanese yen, has sent gold back to the $1,260 area. Surging stock prices Tuesday also dimmed bullion’s appeal.

Still, the metal is up about 19% on the year, and many analysts remain bullish. Trading data as of May 3 showed that hedge funds have raised their net-long positions to the highest levels since 2011, while ETF inflows have risen by 50 metric tons since April 25 for the biggest 10-day increase and longest run in two months, Bloomberg reported.

Golds drivers largely intact: The drivers that have lifted gold prices still remain largely intact, including the continuous wavering of the Fed in terms of the rate increases and the softening of the dollar, which introduced a layer of uncertainty in investors mindsets that tends to support the precious metal, Nitesh Shah of ETF Securities told Reuters.

Three catalysts lie ahead this summer that make gold a must-own asset. Warning of a vortex of negative headlines, Bank of America Merrill Lynch strategist Savita Subramanian thinks the S&P 500 could fall back to February lows this June. Whats behind her prediction?

1. Great Britain’s June 23 Brexit referendum, in which voters will decide whether the nation should leave the European Union;
2. the Federal Reserves next big meeting in June, in which it could raise interest rates for the first time since December; and
3. the countdown to a likely bitter U.S. presidential election pitting presumptive Republican nominee Donald Trump versus his Democratic counterpart, Hillary Clinton.

Fed tightening into a slowdown: Although the odds of a Brexit approval are unlikely, the jury is still out, and the fallout could jolt Great Britain and the EU across a range of areas, including confidence, investment, public finance, and GDP growth. Investors are increasingly likely to turn to gold as a safe haven ahead of the vote.

Meanwhile, although last weeks jobs report as of now doesn’t favor any Fed rate hike, what the central bank might do remains a great unknown. The stock market tumbled at the start of the year in the wake of Decembers rate increase, and this past quarter has seen a deepening earning recession. If it raises rates in June, the Fed is tightening into a profits recession. This typically does not happen, Subramanian noted. Typically tightening cycles start with profits growth really healthy and right now we’ve got negative year-over-year growth.

And finally, the markets are now becoming increasingly subject to the influence of presidential politicking. Were heading closer and closer to the most polarized election that we’ve seen in our careers, so there’s a lot to worry about, said Subramanian. One of the things we’ve noticed is that about six months ahead of November in an election year, the market typically peaks and trends downward.

Add to this uncertain picture the candidacy of Trump, who is seen in some quarters as a risky wild card in terms of his potential policies, and the likelihood of volatility is running very high.

With gold currently dipping from its 15-month high set Friday and entering its traditional summer lull period, that’s all the more reason to invest in the metal at relatively bargain prices.

The Shanghai Gold Exchange launched its groundbreaking yuan-denominated price fix last month, and in doing so set the stage for China to potentially displace London as the global epicenter for the gold trade, among other far-reaching implications. Now, ADM Investor Services Paul Mylchreest has issued a new analysis that spells out exactly why Londons dominance is so vulnerable.

Sensationally titled Death of the gold market: Reforming the LBMA and the true price of gold, the thesis of Mylchreests paper is simple: The London Bullion Market Association (LBMA) simply does not have all the gold needed to back up paper and electronic claims on the metal particularly if Western investment in gold suddenly increases.

Based on his calculations, Mylchreest argues that the LBMA is running into a problem and is facing the biggest challenge since it collapsed from an insufficient supply of physical gold in March 1968.

Growing risk of market failure: According to Mylchreest, investors shouldnt make the mistake of thinking that much physical metal actually changes hands over the course of a given trading day in London. Rather, most transactions are just paper and electronic receipts that represent quantities of bullion.

The assumption that the London-based LBMA members are primarily trading physical gold is inaccurate, he writes. In reality, LESS THAN 5% of gold traded on the LBMA is settled by the delivery of physical metal into what are known as allocated gold accounts.

The opposite of allocated is unallocated. The problem is epitomized by the practice of gold leasing, in which central banks and other institutions loan out gold or claims to their gold without the bullion actually ever leaving their vaults. The end result is multiple counterparty claims to the same bar of gold. The only force sustaining the arrangement is blind faith that the system can deliver actual gold if its ever called upon to do so. In other words, its a fractional reserve system.

Stressing the unsustainable market structure of paper gold instruments versus physical gold bullion, Mylchreest warns of the growing risk of market failure.

Western surge could be game changer: Increasing demand for physical gold from a variety of consumers is putting pressure on the system and raising the odds of a delivery failure. Central-bank buying, Chinese consumption, and the rebound of gold ETFs are all straining the system.

The structural flaws in London leave the gold markets integrity vulnerable to increasing offtake of physical gold. In other words, an old fashioned run, writes Mylchreest. A shift in the balance in gold trading from paper instruments towards physical could quickly destabilise the market.

The explosive element in this picture is Western demand. Western investors, both individually and institutionally, are drastically underinvested in gold. Should a crisis occur that stokes a renewed run into gold, then the London system could implode.

The vast pools of Western capital are not underweight gold, they are almost zero-weighted, Mylchreest notes. Ultimately, gold is a bet on financial system mismanagement in many guises such as inflation, deflation, rising credit risk, declining confidence in policy makers, etc. The fact that mainstream investors and commentators have started to have doubt about central bank policies has been positive for gold. An increase in the current tiny allocation of the vast pools of Western capital into physical gold would have a disproportionate impact on the market. Could the physical gold market accommodate even a modest allocation of Western capital near the current gold price? We doubt it.

Two-tiered system emerging: And now, with yields on trillions of dollars of bonds now turning negative, the age-old rap against gold that it doesnt pay any interest is starting to lose its weight.

And waiting in the wings to take over where London falls short is the Shanghai Gold Exchange, which unlike London is a 100% physically traded and allocated bullion market. Its launch this year is part of China’s long-term plan to elevate its yuan currency to world-reserve status.

Mylchreest sees the potential for a two-tiered gold market emerging, in which the yuan-denominated price (with its assurances of physical backing) carries more weight than the London price, which he argues carries little to no guarantee.

Most investors holding flimsy paper: Mylchreests paper is a clarion call for investors who have settled for gold ETFs instead of physical gold. The vast majority of gold investors are holding paper gold instruments. While their investment rationale might be because they dont trust the financial system or require portfolio diversification, their counterparties are banks in which they are on the lowest rung of creditors. The irony.

Its a tale of two exchanges, one in the West, the other in the East. Without drastic reforms, the sun is setting on London while Shanghai is in its early ascendancy. Its also a tale of two currencies, the U.S. dollar and the Chinese yuan (or renminbi). Though the dollar still dominates, China and Russia are madly scrambling to anoint alternatives, and the yuan has now been tapped for reserve status in the International Monetary Funds SDR (or special drawing rights) system.

The main message of Mylchreests paper is: Dont be left holding the bag. Dont settle for a paper promise of gold when you can still get your hands on the physical metal. And dont denominate all your wealth in U.S. dollars when you can still diversify into alternatives like physical gold.

Fridays horrific nonfarm-payrolls report took much of Wall Street by surprise: Only 160,000 jobs were created in April, the fewest in seven months and well short of estimates projecting at least 200,000.

What wasnt surprising was the fact that gold leaped higher on the news, topping $1,297. Although the yellow metal was unable to reclaim the psychologically important $1,300, it erased most of its losses for the week. Silver posted a slight gain, trading near $17.38 in the afternoon.

Devastating blow to rate-hike odds: Up 21% on the year, gold looks poised for further gains next week as the odds of an interest-rate increase at the Federal Reserves June meeting have all but faded after the jobs disaster. The dollar, accordingly, fell toward 18-month lows after the payrolls report.

The jobs number was a devastating blow to the people who believe that a June rate hike is on the table, RJO Futures strategist Phil Streible told Bloomberg. Now the chances have declined significantly, and as a result gold and silver are moving up and should move through their previous highs.

Indeed, $1,300 remains golds target for next week. Now that the slipping global economy is bearing testimony to the sweeping tide of deflation and the U.S. dollar is likely to weaken further from now on, we expect $1,300 to be attacked again and this time more successfully, said Julian Phillips of GoldForecaster.com.

Open interest at bullish record levels: And RBC Capital gold guru George Gero added, Gold is reacting positively to the jobs number, so with record-high open interest for the year in gold, the metal is expected to finally close over $1,300.

Coming on the heels of last weeks shocking 0.5% first-quarter GDP report, the jobs numbers reinforce the notion that the economy is losing serious steam. The labor-force participation rate fell back near record lows, and one analysis showed that 450,000 waiter and bartender jobs have been created since December 2014, versus absolutely zero manufacturing jobs.

With such weak economic fundamentals, its no wonder that hedge-fund legend Stanley Druckenmiller urged investors this week to dump stocks and buy gold. Now Societe Generale strategist Albert Edwards is repeating his warnings about the global economy.

Global economy to sink like Titanic: The dollars recent rapid slide has been accompanied by a constant backdrop of dovish cooing from the Fed, Edwards wrote. Until this week, both equity and commodity markets had embraced the weak dollar as the elixir to solve all their ills. That relief has now proved fleeting as fear of weak economic activity has reasserted its influence on investors. The weak dollar should be seen as merely a shuffling of deckchairs on the Titanic before the global economy sinks below the icy waves.

Risk assets are once again refocusing on the increasingly dismal prospects for global growth rather than the short-term relief of dollar weakness. The U.S. remains the main concern, although the rapid unraveling of Abenomics in Japan and a likely imminent tightening of monetary policy in China to snuff out yet another housing bubble in the major cities also feature high on investors worry list.

But it is in the U.S. that growth concerns remain most intense, with renewed weakness in the manufacturing ISM as we move into Q2 following on from the moribund 0.5% qoq Q1 GDP outturn.

The sad thing is that … the Fed has boxed itself into a corner, for surely it is clear to all in the markets by now that it’s not global risks that worry the Fed but the impact on the S&P. But all the Fed’s loosey goosey will prove irrelevant as the cycle ends. Get ready to suck it up as the inevitable recession demonstrates the Fed’s total impotence.

It ends with social unrest and double-digit budget deficits (again). It ends with investors losing faith with the Fed as the resumption of QE proves ineffective in reviving the economy. It ends in deeply negative interest rates, currency and trade wars, helicopter money and ultimately inflation. In a nutshell, it ends badly.

Supply-and-demand factors for silver continue to suggest a bullish price picture in the year ahead. Thats what investors can surmise from the new World Silver Survey 2016 produced by Thomson Reuters GFMS in conjunction with the Silver Institute.

Consumption has perhaps never been higher. The surveys look back over the past year confirms that the silver market saw record demand in 2015, with the jewelry, coin and bar, and photovoltaic sectors posting new highs, helping to boost total silver demand to 1.17 billion ounces last year, the institute wrote in summarizing the survey.

Coin, bar consumption surging: Industrial uses for silver comprise the largest component of consumption, but investment demand also hit new peaks in 2015. Identifiable investment, which includes physical bar investment, coins and medals, and exchange traded product (ETP) build, climbed 16% to a near record high in 2015, the institute noted.Silver coin and bar investment surged 24% to reach 292.3 Moz, the highest annual demand level in GFMS records, overtaking the previous high in 2013. Coin and bar demand accounted for 25% of total physical demand in 2015, the highest market share on record and up from just 5% a decade earlier.

In contrast, readily available supplies are dwindling. Although annual production hit record highs in 2015, the rate of growth is faltering. The overall slowdown in mine production last year is expected to continue, the institute predicted. This forecast follows CPM Groups similar call in recent weeks that newly mined silver production will fall 2.4% this year.

Scrap supply also dried up in 2015, significantly down by 13% at 146.1 Moz, the lowest volume level recorded since 1992 and the fourth consecutive year of decline.

Upward trend for silver price: Given these tensions between supply and demand, its no wonder that GFMS is bullish on the price. Whats surprising, however, is that it seems to be lowballing the white metals potential. After all, silver is up more than 20% this year and was trading around $17.43 on May 5.

GFMS has set an average annual price of $15.90 for this year. If that seems low, consider this: We also forecast on a quarterly average basis, and the average for the fourth quarter is $16.80, GFMS analyst Erica Rannestad told Silver Investing News. So overall, we expect an upward trend for silver prices over the course of this year.

The firm sees silver moving even higher in 2017, producing an average price of $17.50.

With loose monetary policies from global central banks showing no signs of stopping, silver is a great way to hedge against ongoing currency devaluations. And everyday investors by and large are choosing silver American Eagle bullion coins as their go-to method. As of May 4, almost 20 million (specifically 19,915,500) silver Eagles have been sold so far this year. Thats 26.8% more than at the same time in 2015, during the record-setting year that saw 47 million Eagles purchased. Thus, 2016 is proving to be another blockbuster for the U.S. Mints flagship bullion coin.

After breaking above $1,300 earlier this week to hit 15-month highs, gold has seen a bout of profit taking ahead of Fridays widely watched nonfarm-payrolls report from the U.S. Labor Department.

The metal was trading near $1,280 Wednesday afternoon, up from session lows of $1,270 but held in check by a rebound in the U.S. dollar. Despite the dip, gold still has gained about 20% on the year. Silver was down but maintaining the $17 level, trading near $17.32.

Hawkish statements from top Federal Reserve officials, mainly President Dennis Lockhart of the Atlanta Fed, helped boost the buck and take some steam out of golds ascent. Lockhart said an interest-rate increase remains a real option at the central banks June meeting.

Helicopter cash coming, Gross says: Of course, investors should take such statements with a grain of salt because the Fed has a vested interest in pretending that its policies are working instead of failing to goose U.S. growth. Some top Wall Street figures dont see a rate hike coming, including bond guru Bill Gross of Janus, who went so far as to predict more quantitative easing via so-called helicopter money to stimulate the economy.

Drop the money from helicopters, wrote Gross. There is a rude end to flying helicopters, but the alternative is an immediate visit to austerity rehab and an extended recession. I suspect politicians and central bankers will choose to fly, instead of die. Gross predicted more QE perhaps even in the U.S. in a year or so.

Private-payrolls report tanks: Given the slew of disappointing economic data this week, Gross might be correct. Although the trade deficit shrank and the PMI services-sector gauge rebounded, the Automatic Data Processings tally of private-sector job creation fell short Wednesday, with only 156,000 positions materializing versus 195,000 expected the worst tally in three years. And while durable-goods orders rose in March, gains were largely driven by defense spending; year-over-year core durable-goods orders actually fell for the 14^th month to their lowest level since 2013. Meanwhile, U.S. productivity continues to slump.

Fridays jobs report will be key to gauging the health of the jobs market and therefore the likelihood of fresh rate hiking from the Fed. The payrolls report also will be important for gold prices. A weaker U.S. employment report on Friday will push gold prices back above $1,300, ABN Amro analyst Georgette Boele told Reuters. Speculative positions are in excessive territory, but they could remain there for quite some time, meaning prices could go lot higher before the correction starts.

$1,200 support key to golds run higher: And even if a deeper correction strikes, as long as $1,200 holds, gold could be poised to move higher. Assuming a correction/pullback from the $1,300-1,307 resistance area over the coming session holds above the $1,200 area, we will have further evidence of a more significant reversal taking shape in gold, CLSA technical analysts wrote. Such a move would form the right shoulder of a more than a two-year basing pattern (inverse head-and-shoulders base) which would ultimately support an upside target of $1,600-1,610.

Another bullish sign for gold is open interest. Open interest, a tally of outstanding contracts in Comex futures, rose to the highest in five years on Monday, showing traders are expecting further increases, Bloomberg reported.

Theres a lot more interest in gold and were seeing a lot of people looking to enter gold, RJO Futures strategist Bob Haberkorn said. Were seeing a lot of new buying coming in. Overall, the sentiment toward gold is extremely bullish.

Miners struggling to meet demand: And longer-term, supply-and-demand constraints continue to support gold. Top South African miner Randgold expects bullion to stay supported between $1,000 and $1,400 this year, with CEO Mark Bristow remarking, Fundamentally our industry is struggling to deliver the gold thats being demanded.

Citing the spread of negative interest rates around the world, Saxo Bank economist Kay Van-Petersen is even more bullish, predicting the metal will hit $1,500 in the next six to 18 months. No one knows how this ends, he said. But one thing is for sure now, its a game of capital preservation. There is no holy grail, but from a macro-perspective, I think you have to look at precious metals.

With Republican presidential contender Donald Trumps decisive win in the Indiana primary solidifying his grip on his partys nomination, China addressed the implications of the billionaires victory through its state-controlled media. Meanwhile, it continues to take steps to corner the market on precious metals in its bid to elevate its yuan currency as a serious rival to the U.S. dollar.

Though a White House win by Democratic rival Hillary Clinton likely would maintain the status quo of Sino-U.S. relations, Chinas Global Times noted that Trump represents a more uncertain outcome. If Trump really captures the White House, what will it mean? This scenario is becoming increasingly serious, it wrote.

A Trump-led U.S. might be inclined to isolationism and attach more importance to America First, and American economy, it added. After enjoying massive trade surplus from the U.S. for years, China and Japan will be demanded by Washington to widen market access.

China with strength awaits president: The newspapers solution for China? Improving strength is the most reliable way to respond to the U.S. uncertainties. We believe that no matter whether Trump or Clinton prevails, they will see a China with strength from different perspectives.

And that show of strength is on display right now, with China planning military drills in the South China Sea as it exercises control over the disputed Spratly archipelago. The maneuvers will involve advanced warships and submarines, including a guided-missile destroyer. Allied closely with the Philippines and other nations with a stake in the area, the U.S. Navy has put on numerous displays of force in the disputed waters in the past year in attempting to limit Chinas moves.

Gold-import rules streamlined: China also is keeping its eyes on the precious-metals sphere, where it continues to mine, amass, import, and trade massive quantities of bullion. And importing it just got a whole lot easier, with Bloomberg reporting that Chinas central bank has relaxed rules to speed up acquisition of the metal.

The central bank and customs will allow companies that have frequent imports and exports of gold and gold products to apply for a single permit that can be used in as many as 12 shipments, Bloomberg noted. The trial to simplify the rules takes effect June 1 and applies to Beijing, Shanghai, Guangzhou, Qingdao, Nanjing and Shenzhen.

The move will reduce paperwork and speed up gold imports because previously importers had to apply for an overall import quota from the central bank and then report and register every single shipment, said Jiang Shu of Shandong Gold Financial Holdings Capital Management Co.

Shanghai bourse stockpiling silver: Moreover, China is devoting efforts to increasing its control over the global silver trade. Steve St. Angelo of the SRSrocco Report says a key Shanghai exchange is on course to amass more silver than JPMorgan has on the Comex.

JPMorgans total silver inventories have declined from 69.4 Moz (million ounces) to 67.2 Moz, while the Shanghai Futures Exchange silver stocks have increased from 54.7 Moz to 60.6 Moz, St. Angelo noted. If the Shanghai Futures Exchange continues to add silver at this rate, it will surpass JPMorgan in a two to three weeks. The Chinese are adding a lot of silver to their Shanghai Futures Exchange warehouses. The build from 7.5 Moz in August 2015 to over 60 Moz of silver in the beginning of May puts JP Morgans four-year inventory growth to shame.

Time is running out fast for London hub: In other words, China is opening up the floodgates even further to accumulate huge quantities of precious metals while also tightening its grip on market pricing mechanisms (witness the recent launch of its yuan-denominated price fix). The goal: to make its currency as good as gold.

Not many in the West are paying attention to these developments, but some are, especially in London, the current world epicenter of the gold trade. One gold dealer there told the Platts news service that someone needs to step in and help rejuvenate Londons importance as a global gold hub. I think it should be the best [London as a global hub for gold trade] and still could be, but time is running out fast, he said.

Some would argue that time also is running out on the U.S. dollars dominance as a global reserve currency. It remains to be seen who will best maintain that primacy, Trump or Clinton (or someone else). But regardless of who wins the presidency, rest assured that China is getting prepared.