Rising geopolitical tensions could support gold and eventually push prices above $2,000 an ounce, says commodity analysts at BCA Research.

In a research note published late last month, the Montreal-based research firm said it was raising its year-end gold forecast to $2,000 an ounce as a wartime economy begins to take shape in the West and the risk of "fiscal dominance" continues to rise.

Robert Ryan, chief commodity and energy strategist at BCA and the lead author of the latest report, wrote the risk of fiscal dominance, with monetary authorities pegging rates to low levels, will intensify as government policies driven by environmental and defense imperatives continue to expand in the West.

Since the BCA's comments last month, political relations between the U.S. and China have deteriorated even further, especially since the U.S. shot down a suspected Chinese spy balloon two weeks ago.

This weekend, the U.S. stoked fears that the geopolitical situation in Ukraine could escalate further as China considers providing Russia with "lethal support."

At the same time, China held joint military exercises with Russia and South Africa as tensions in Ukraine hit a one-year mark.

Ryan noted that rising geopolitical uncertainty comes as economic conditions continue to worsen. He added that in the current environment, there is no certainty that the Federal Reserve will raise interest rates above 5% this year.

At the same time, the conflict in Ukraine will continue to weigh on commodity prices, keeping inflation high. Market disruptions, Western countries' commitment to developing clean energy infrastructure and increased defense spending are all factors that will continue to support higher inflation.

Analysts said headline inflation may fluctuate between 4% and 5% in the next few years.

According to Incrementum's Ronald-Peter Stoferle, gold prices may fall, but now is the time to get strategic.

Another positive moment for gold against the backdrop of growing geopolitical tensions is the increased influence on the U.S. dollar. There is a slight increase in petro-yuan trading as countries buy oil in China's currency.

While this trend won't pick up much this year, it's enough to undermine the U.S. dollar's role as a global reserve currency, and a weaker dollar is one less hurdle for gold prices.