​Gold prices, which briefly topped $1,600 last week, could rally to $2,000 an ounce amid heightened political risks, Bridgewater’s co-chief investment officer Greg Jensen told the Financial Times Wednesday.

The manager from the world’s biggest hedge fund cited increased income inequality in the U.S. and rising tensions with China and Iran as uncertainties ahead that will prompt more safe-haven buying. Bridgewater manages $160 billion in assets, more than any other hedge fund.

"There is so much boiling conflict, that gold being part of a portfolio makes sense to us,” Jensen told the paper. “People should be prepared for a much wider range of potentially more volatile set of circumstances than we are mostly accustomed to.”

Jensen also believes the Federal Reserve would let inflation run hot for a while, which also creates an environment for higher gold prices as investors tend to use the precious metal as a hedge against inflationary forces. “There will no longer be an attempt by any of the developed world's major central banks to normalise interest rates. That's a big deal."

The Federal Reserve cut interest rates for three times last year to combat a slowing economy. Jensen said it’s possible the central bank could slash rates to zero this year to avoid a recession and disinflationary pressures.

In fact, rising inflation and soaring budget and trade deficits could lead to gold eventually replacing the US dollar as the world's reserve currency, Jensen told the newspaper.

"When you look at the geopolitical strife, how many foreign entities really want to hold dollars? What are they going to hold? Gold stands out because it's nobody else's liabilities as a possibility."

Spot gold rose 0.3% to $1,551.40 per ounce on Wednesday, after crossing the $1,600 mark and hitting a seven-year high last week. The U.S.-China trade war and the Middle East unrest drove investors to more conservative investments for its stability during times of tumult, pushing gold prices higher.

US stocks are also "frothy" after a decade of outperformance, Jensen said, providing another reason to favor gold.

Earlier last year, founder of Bridgewater Ray Dalio advocated putting money into gold as he saw a “paradigm shift” in investing due to global central banks’ expected moves to an easier monetary policy.

Bridgewater is not alone in recommending the bullion. DoubleLine CEO Jeffrey Gundlach also said last year he was a buyer of gold on expectations that the dollar would weaken.