Bulls cut positions as prices rally most in two months

Speculators cut bullish commodity positions by the most in five months as prices had their biggest gain in eight weeks on mounting speculation that stimulus measures will bolster economic growth.

Hedge funds and other large speculators lowered combined net-long positions across 18 U.S. futures and options by 11 percent to 931,048 contracts in the week ended Nov. 6, the biggest cut since June 5, Commodity Futures Trading Commission data show. Holdings have dropped for five weeks, the longest slump since April. Gold wagers fell to the lowest since August before prices gained the most since January.

U.S. consumer confidence climbed to a five-year high in November, and exports reached a record in September, separate reports showed last week. President Barack Obama won his bid for a second term on Nov. 6, defeating Republican challenger Mitt Romney, who had criticized Federal Reserve policies. The central bank may extend its program of debt buying through 2014 because the economy is still burdened by 7.9 percent unemployment, according to JPMorgan Chase & Co.

“The tailwind for commodities from policy makers to boost economies will help demand rise,” said Adam De Chiara, who helps manage $4 billion of assets at CoreCommodity Management LLC in Stamford, Connecticut. “I don’t see the easing stopping anytime soon as the slowdown concerns remain.”

GSCI Rally

The Standard & Poor’s GSCI Index of commodities climbed 1.7 percent last week, the biggest gain since the week to Sept. 14. The MSCI All-Country World Index of equities fell 2.2 percent, and the dollar rose 0.5 percent against a basket of six major currencies. Treasuries returned 0.8 percent, a Bank of America Corp. index shows. The S&P GSCI climbed 0.3 percent today.

The U.S. trade deficit shrank to $41.5 billion, the smallest since December 2010 and lower than any estimate in a Bloomberg survey of economists, the Commerce Department said Nov. 8. The Thomson Reuters/University of Michigan preliminary consumer sentiment index rose to 84.9, the highest since July 2007, data showed Nov. 9. Consumer spending accounts for about 70 percent of the U.S. economy.

European Central Bank President Mario Draghi told journalists in Frankfurt on Nov. 8 that the bank stands ready to activate its bond-purchase program to “avoid extreme scenarios” for economies. The Fed’s open-ended program to buy $40 billion of bonds per month will last through the first half of 2014, and mortgage-debt purchases may reach $700 billion, according to Michael Feroli, the chief U.S. economist at JPMorgan in New York.

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