Crude, gold prices head north with Russia-Ukraine tensions rising

New Delhi: Yet another day of rising crude oil prices passed on Tuesday with increasing tensions in the Russia-Ukraine situation. Both gold and crude saw prices shooting up in parallel with the thickening of war clouds over the two countries' borders.

Brent-indexed crude oil prices rose over $95 per barrel, the highest in several years. Similarly, gold prices traded higher with spot gold prices at COMEX rising to over $1,900 per ounce.

Political tensions in regions where crude oil production takes place traditionally cause a rise in prices with supply disruption fears. In the current standoff between Russia on the one hand and the US and Nato countries on the other, there is the added factor of economic sanctions being imposed on Russia by the US which are sure to interrupt the free flow of funds in international banking system.

Given this scenario, the rise in prices was prompted by Russian President Vladimir Putin directing the deployment of troops into two separatist areas within Ukraine. On Monday, Russia recognised the two separatist regions' independence, a move that some fear puts Ukraine and Russia one step closer to a military conflict.

Russia is one of the world's top producers of crude oil and gold, and any western sanctions against it will stiffen the global supply.

Besides, the development also assumes significance for India as it is import-dependent to fulfil its crude oil and gold needs. Finance minister Nirmala Sitharaman, at a forum on Tuesday commented that the government and regulators are keeping close tabs on the evolving Russia-Ukraine situation, high crude oil prices and the extreme volatility in financial markets.

The rise in crude oil prices can escalate domestic prices, thereby triggering inflation. However, despite the gradual rise in crude prices over the last several days, oil companies have not come out with any hike in retail fuel prices, a feature generally attributed to the elections being held in five states. The finance minister however, implicitly dismissed this election-related inference and said that it was for oil marketing companies to decide. But historically, oil marketing companies, heavily dominated by government-owned entities, have by and large refrained from raising retail prices in the run-up to elections and switched to hike mode immediately after polls.

Meanwhile, price rise projection is a common sentiment shared by financial experts. AIIFL Securities VP, Research, Anuj Gupta, said, "Gold and crude oil prices are trading on a positive note due to geopolitical tension."

"We are expecting gold and crude oil prices may rise further... Gold prices may test $1,950 to $2,000 and crude oil prices may test $100 to $105 levels soon."

(With inputs from IANS)