VINACHEM

Money managers cut their net-long position by 9 percent to35,686 futures and options as of May 21, the lowest since July2007, U.S. Commodity Futures Trading Commission data show.Holdings of short contracts rose 6.7 percent to a record 79,416.Net-bullish wagers across 18 U.S.-traded commodities slid 2.1percent, as investors became more bearish on coffee and wheat.

“Gold has so many drivers that it leads to a lot ofgetting pushed around by one thing or another,” said Dan Denbow, a fund manager at the $1 billion USAA Precious Metals &Minerals Fund in San Antonio. “It makes it impossible todetermine a direction.”

May Returns

Futures dropped 5.4 percent in May, poised for a secondmonthly decline. The Standard & Poor’s GSCI Spot Index of 24commodities declined 0.1 percent and the MSCI All-Country Worldof equities fell 0.1 percent. A Bank of America Corp. Indexshows Treasuries lost 1.3 percent.

Increasing price swings have made gold the fourth-mostvolatile commodity in the GSCI index since March 29, datacompiled by Bloomberg show. Silver topped the ranking for rawmaterials tracked by S&P, followed by natural gas and corn.Investors sold 467 metric tons of gold through ETPs this year,contributing to $45.3 billion of value being erased from globalholdings, as some lost faith in the metal as a store of wealth.

Futures traded in New York rose 0.5 percent as of 4:16 a.m.after earlier slipping as much as 0.3 percent.

Gold rose as much as 2.6 percent and dropped as much as 1.8percent on May 22, the day Bernanke told Congress that raising interest rates or curbing bond buying too soon would endangerthe recovery, while also saying the bank may slow its assetpurchases if there are signs of sustained economic growth.Kuroda said May 24 the Bank of Japan had announced enoughmonetary easing and will implement flexible money-marketoperations.

Temporary Volatility

Volatility in gold prices will be temporary and investorswill return to buy the metal as a hedge against inflation, saidNic Johnson, who helps manage $30 billion of commodity assets atPacific Investment Management Co. in Newport Beach, California.

While price swings increased this quarter, gold was thethird-least volatile commodity in the past five years. Cattleand feeder cattle were the most stable and natural gas and crudeoil had the most variations. Bullion surged 57 percent since theend of 2008 as central banks printed money on an unprecedentedscale to boost growth.

The U.S Mint sold 209,500 ounces of gold coins last month,the most since December 2009. Central banks may buy as much as550 tons this year after adding 534.6 tons in 2012, according tothe London-based World Gold Council. Twelve analysts surveyed byBloomberg expect prices to rise this week, with nine bearish andeight neutral, the highest proportion of bulls since April 26.

‘Diversifying Element’

“Gold is a diversifying element to people’s portfolios,”Johnson said. “The liquidation is more institutional in nature,so I think investors very much view gold in the same light asthey did before. Volatility will decline back to historiclevels.”

Money managers pulled $1.57 billion from gold funds in theweek ended May 22, according to Cameron Brandt, the director ofresearch for Cambridge, Massachusetts-based EPFR Global, whichtracks money flows. Total outflows from commodity funds were$1.89 billion, according to EPFR.

Investor sentiment is “negative towards gold,” andphysical demand has started to slow, Suki Cooper, a New York-based analyst at Barclays Plc, said in a May 24 report. Themetal will get “crushed” and trade at $1,100 in a year andbelow $1,000 in five years as inflation fails to accelerate, Ric Deverell, the head of commodities research at Credit SuisseGroup AG, said in London on May 16.

Crude Wagers

Bets on a rally for crude oil climbed for a fourth week to231,794 futures and options, the highest since March 2012, theCFTC data show. Investors are holding a silver net-shortposition of 187 contracts from a net-long holding of 1,413 aweek earlier. Bullish platinum wagers fell 17 percent to 19,713,the biggest drop since February.

China’s manufacturing is contracting in May for the firsttime in seven months. A Purchasing Managers’ Index from HSBCHoldings Plc and Markit Economics released May 23 showed apreliminary reading of 49.6 for May, below the level of 50separating growth and contraction and missing analyst estimates.

A measure of net-long positions across 11 agriculturalproducts slumped 15 percent to 228,870 contracts, the first dropin six weeks. Speculators held a coffee net-short position of11,695 contracts, compared with 172 a week earlier. Wagers on adecline for wheat expanded to 40,447 from 17,225. Bullish cornholdings fell for the first time in four weeks.

Coffee prices tumbled 7 percent last week, the most sinceJuly. Inventories monitored by ICE Futures U.S. soared 79percent in 12 months. Farmers will harvest the biggest grain andsoybean crops ever this year as U.S. fields recover from lastseason’s drought that was the worst since the 1930s, the U.S.Department of Agriculture estimates.

“I would be underweight the commodities at this pointuntil we start seeing a pickup in global growth and a self-sustaining recovery here in the U.S.,” Chad Morganlander, aFlorham Park, New Jersey-based fund manager at Stifel Nicolaus &Co., which oversees about $130 billion. “The global economy hasbeen decelerating, and China is struggling.”