Bull run on yellow metal diminishes as hungry bears tighten grip

Futures climbed as much as 16 percent in 2014 to this year's high in March after the Crimeans voted to join Russia, boosting demand for the metal as a haven asset. Ukrainian troops last week repelled attacks on Donetsk airport, killing 10 rebels and destroying two tanks, after a Swiss Red Cross worker's death by shelling in a nearby residential area further frayed a month-old truce.

"I don't see gold as being particularly negative," Michael Cuggino, who manages about $8.5 billion of assets at Permanent Portfolio Family of Funds Inc in San Francisco, said on Thursday. "We're long-term holders because we believe in it as a component in maintaining and building long-term wealth. It's in the lower end of a trading range, and in my view, it's a volatile asset. I am not overly concerned about it."

Bullion climbed 70 percent from December 2008 to June 2011 as the Fed bought debt and held borrowing costs near zero percent, boosting inflation concerns. In 2013, bullion fell 28 percent to halt a 12-year rally as some investors lost faith in the metal as a store of value.

Prices fell 8.4 percent in three months ended Sept 30, the first quarterly loss this year. The Fed on Sept 17 reduced monthly bond purchases to $15 billion, on track to announce an end to the program this month. Inflation expectations, measured by the five-year Treasury break-even rate, last week reached the lowest since June 2013.

Net-wagers across 18 US traded commodities rose 0.5 percent to 452,794 contracts as of Sept 30, the first gains since June, CFTC data show.

The Bloomberg Commodity Index dropped to a five-year low on Friday, after tumbling 12 percent in the third quarter, the most since 2008.

About $1.05 billion was removed from US ETF backed by raw materials in September, the biggest monthly withdrawal since December, data compiled by Bloomberg show. Outflows were led by redemptions from precious metals and energy.

Bets on higher oil prices rose 4.1 percent to 201,863 contracts. West Texas Intermediate crude dropped 4.1 percent last week, the most in two months.

The net-short position in copper reached 21,438 contracts, compared with 12,304 a week earlier. The world's biggest user of the metal is China, where economists forecast growth next year will be the slowest in two decades.

A measure of net-long positions across 11 agricultural commodities rose 1.9 percent to 234,079 contracts, the government data show. Holdings are down 79 percent from this year's peak in April, and investors are betting on declines for wheat, soybeans, cotton, sugar and soybean oil.

The cotton net-short position reached 8,168 contracts, the most-negative outlook since November 2012. Global stockpiles will climb 6 percent in the 12 months ended July 31, 2015, to a record 106.3 million bales, according to the US Department of Agriculture. A bale weighs 480 pounds, or 218 kilograms.

"In the context of slowing growth in Europe and China, the world isn't growing very quickly, and you are not seeing growth in commodity demand either," Frances Hudson, an Edinburgh-based global thematic strategist at Standard Life Investments Ltd, which oversees $333.6 billion, said Sept 30. "If the dollar keeps strengthening, commodities will fall. Unless we get a complete turnaround in growth, the commodity super-cycle, for the moment, is done."

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