Oil and Dollar eye annual losses, Gold gains on shifted Fed outlook

WTI crude faces a 10% annual decline despite OPEC+ cuts, gold climbs over 13% on rate cut anticipations, and the dollar index drops over 2% in 2023 as Fed policy softens.

By Ahmed Azzam | @3zzamous | 29 December 2023

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  • Asian stocks drop in the last session of 2023, while Japan records a decade-high annual gain.

  • WTI crude stabilizes at $72 but faces its first annual loss since 2020.

  • Gold ends the year stronger, buoyed by rate cut expectations.

  • Dollar index holds steady, yet marks an annual decline.

As 2023's trading winds down, Asian stocks experienced a dip in their final session, contrasting with Japan's significant yearly gain, the best in a decade. Meanwhile, US and European futures edged up slightly, along with benchmark Treasuries. The dollar maintained steadiness while Brent crude saw a slight increase.

Oil on track for first yearly decline since 2020

WTI crude futures steadied around $72 per barrel on Friday but are on track for their first annual loss since 2020. This decline, about 10% for the year, reflects concerns over increasing global crude supplies and slowing demand growth. Despite OPEC+ production cuts and geopolitical conflicts, these factors failed to sustainably boost oil prices. The year witnessed short-lived rallies in oil prices, primarily driven by OPEC+ cuts. However, rising production from non-OPEC countries and a shaky demand outlook have contributed to the downward pressure on prices.

Gold poised for yearly rise amid expectations of rate reductions

Gold steadied at around $2,070 an ounce and is poised to conclude the year with a notable gain. Firm expectations of US Federal Reserve rate cuts early next year have bolstered the precious metal, which climbed more than 13% in 2023, marking its first annual gain in three years and achieving a new record high.

Dollar braces for year-end decline amid softened Fed stance

The dollar index, though stable above 101 on Friday, is set to end the year on a lower note. The index lost over 2% in 2023, following a cumulative gain of about 15% in the previous two years. This year's decline reflects the changing market sentiment and monetary policy expectations.

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