CITI: Gold could shatter $2,000, reach all-time high if recession risks continue

FILE PHOTO: Gold bullion is displayed at Hatton Garden Metals precious metal dealers in London, Britain July 21, 2015. REUTERS/Neil HallFILE PHOTO: Gold bullion is displayed at Hatton Garden Metals precious metal dealers in LondonReuters

  • Gold could hit historic highs and even break $2,000 per ounce in the next couple years if recession risks and rate cuts continue, analysts at Citi said in a Tuesday note.
  • The precious metal is up about 17% year-to-date as trade war tensions and downturn fears drive investors toward the "safe haven" asset.
  • The analysts' positive outlook sees risks from the possibility of a surprise trade deal between the US and China, and from possible hawkish decisions from the Federal Reserve.
  • Watch gold trade live here.

Gold could hit $2,000 per ounce in the next year or two if lower interest rates and recession fears stick around, Citi analysts said in a Tuesday note.

The analysts' "medium term" target represents a new historic high for gold, which last peaked in August 2011 when it reached $1,830.55 per ounce.

The coveted metal surged through 2019, and is up about 17% year-to-date. Geopolitical tensions, lower global interest rates and looming recession risks fueled the run-up, Citi analysts said. Though the bank expects "profit taking" in the short term, it sees gold trading "stronger for longer" in the next three years.

"We find it reasonable to consider an increasing probability that bullion markets can re-test the 2011 to 2013 nominal price peaks and trade to $1,800-2,000 per ounce by 2021 and 2022 on the back of a US business cycle turn towards slower growth/recession on top of election uncertainty," the team led by Aakash Doshi wrote.

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The note upgrades the bank's fourth-quarter target price for gold to $1,575 per ounce, and its 2020 price target to $1,675. Gold traded at $1,491.53 as of 1:35 p.m. ET Tuesday.

Citi's rosy outlook for gold does see "clear risks" from a hawkish pivot by the Federal Reserve and upgrades in global growth expectations, the analysts noted. A surprise deal ending the trade war would suggest a price peak at $1,550 per ounce, they added.

The precious metal is a popular "safe haven" investment during times of economic volatility, as its physical scarcity and steady demand appeals to those looking to escape tanking markets.

The People's Bank of China has been stockpiling gold in its reserves for eight months in a row, signalling the nation expects continued market volatility and a prolonged trade war with the US.

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