Gold prices might rally to a record above US$2,000 an ounce in the next two years, according to Citigroup Inc, which gave a laundry list of positive drivers, including rising risks of a global recession and the likelihood that the US Federal Reserve would reduce interest rates to zero.

“We expect spot gold prices to trade stronger for longer, possibly breaching US$2,000 an ounce and posting new cyclical highs at some point in the next year or two,” analysts including Aakash Doshi said in a note received yesterday.

That would exceed the record of US$1,921.17 set in 2011.

Low or lower-for-longer nominal and real interest rates, global recession risks exacerbated by US-China trade tensions and heightened geopolitical rifts are “combining to buttress a bullish gold market environment,” the bank said.

“In affinity to our US rates research colleagues, we believe the Fed will ultimately end up cutting rates all the way to zero,” the analysts added.

Gold this month hit a six-year high as central banks ease policy to address the slowdown in growth amid the trade dispute.

This week, investors expect the European Central Bank to unleash more stimulus, while next week the Fed is expected to cut rates again. That has helped drive flows into bullion-backed exchange-traded funds as investors track the trajectory of the US economy.

“For now, the US consumer and potential growth story is holding up,” Citi said in the note.

However, “we remain more concerned about market signals — three-month to 10-year yield curve inversion — and leading indicators that are weakening at the fastest pace since the Great Recession,” it said.

Spot gold yesterday traded at US$1,491.34 an ounce, up 16 percent this year after rising for the past four months.

Citi said that it had upgraded its baseline forecasts for gold on the Comex by US$125 to US$1,575 an ounce for the fourth quarter, and by about 14 percent to US$1,675 for next year.

Citi’s outlook did come with caveats, including a hawkish turn from the Fed or a breakthrough in trade talks, although that is not its base case.

“A surprise trade deal coupled with a sharp upturn in global manufacturing data would probably suggest a peak for gold at the US$1,550 an ounce level for this cycle,” it said.