Hedge funds got less bullish on gold, cutting their net-long position to a four-month low, before prices capped the biggest weekly retreat since September.

Net holdings in futures and options tumbled 20 percent to 44,291 contracts in the week ended Nov. 19, the lowest since July 9, U.S. Commodity Futures Trading Commission data show. Short bets rose 16 percent to the highest since Aug. 6 and long wagers slid 2.5 percent. Net-bullish wagers across 18 U.S.- traded commodities fell 12 percent as investors became the most bearish on copper since July and cut their silver holdings by the most in five months.

Gold fell 6.1 percent this month, heading for the worst slide since June, when the metal reached a 34-month low. The Federal Reserve signaled Nov. 20 that it may ease stimulus in coming months. Billionaire John Paulson told clients the same day he personally won’t invest more money into his gold fund because it’s not clear when inflation will quicken. The U.S. cost of living declined in October for the first time since April, while wholesale prices fell for a second month.

“With the Fed perhaps stepping back, it’s hard to make a case for inflationary behavior out there,” said Jeffrey Sherman, a money manager who helps oversee $53 billion at DoubleLine Capital LP in Los Angeles. “People aren’t as worried about inflation, thus you’re not seeing people buying gold.”

Gold Bears

Futures dropped 3.3 percent last week, the biggest slide since Sept. 13. Prices fell to a four-month low on Nov. 21 after Fed minutes released a day earlier showed policymakers project enough strength in the labor market to warrant slowing bond buying. Nineteen analysts surveyed by Bloomberg News expect prices to fall this week, nine are bullish and three neutral, the largest proportion of bears since June 21.

Gold slumped 26 percent this year to $1,242.80 an ounce on the Comex in New York, heading for the biggest annual loss since 1981. The Standard & Poor’s GSCI gauge of 24 commodities dropped 3.4 percent. The MSCI All-Country World Index of equities climbed 18 percent, while the Bloomberg Dollar Index, a gauge against 10 major trading partners, rose 3.3 percent. The Bloomberg Treasury bond Index fell 2.4 percent.

Billionaire Paulson, who had so much conviction in gold that he used the SPDR Gold Trust exchange-traded product to start share classes for his funds denominated in bullion, told clients last week that he personally wouldn’t invest more money, according to a person familiar with the matter.

Paulson, Soros

Paulson’s sentiment echoes other investors who have lost faith in the metal as a store value. Global ETP holdings have dropped to the lowest since April 2010, with more than $73 billion erased from their combined value since the peak in October 2012, data compiled by Bloomberg show.

Billionaires George Soros and Daniel Loeb sold their entire investments in the SPDR Gold Trust in the second quarter, U.S. government filings showed. Prices tumbled into a bear market in April.

Gold may slide to $1,050 by the end of next year, Goldman Sachs Group Inc. said in a report Nov. 20. The bank said it’s projecting “significant” declines through 2014.

The metal climbed 70 percent from December 2008 to June 2011 as the Fed expanded its balance sheet through debt purchases, fueling the outlook for rising inflation. Four of five investors expect the Fed to delay a decision to taper until March or later, with just 5 percent looking for a move next month, according to the latest Bloomberg Global Poll.

‘Exhausted’ Sellers

“Fundamentally, it strikes me the monetary policy remains extremely positive and accommodating for gold,” said Adrian Day, who manages about $135 million of assets as the president of Adrian Day Asset Management in Annapolis, Maryland. “The sellers have to get exhausted. I’m not sure we’re at that point yet, but I think we’re very close.”

Janet Yellen, nominated to be next chairman of the Fed, signaled during her Nov. 14 testimony to the Senate Banking Committee that she’ll continue with quantitative easing until there’s a robust recovery. The European Central Bank this month lowered its benchmark interest rate to a record low of 0.25 percent, citing the possibility of a prolonged period of low inflation.

The cost of living in the U.S. fell 0.1 percent in October, a Labor Department report showed Nov. 20. The producer-price index slumped 0.2 percent last month, after a 0.1 percent drop in September, a separate report showed the next day. Gold tumbled 35 percent since reaching an all-time high of $1,923.70 in September 2011.

U.S. inflation is running at 1 percent, half the rate of the past decade. Expectations for increasing costs as measured by the break-even rate for five-year Treasury Inflation Protected Securities fell 12 percent this year.

Bears Advance

Speculators cut their net-position in gold by 56 percent in the three weeks through Nov. 19, the biggest such decline since June 2007. Short bets climbed for three straight weeks, the longest advance for bears since July. Long holdings reached 106,800 contracts, the lowest since July 2012.

Bullish bets on silver declined 52 percent to 4,657 contracts, the lowest since August, the CFTC data show. Silver prices slumped 4 percent to $19.901 an ounce in New York last week, the fourth weekly drop and the longest stretch of losses since April.

Speculators almost tripled their net-short bets on copper to 24,067 contracts, compared with 8,117 a week earlier. That’s the most negative outlook since July 30. Output of the refined metal in China, the world’s largest user, climbed 23 percent to a record 637,000 metric tons in October from a year earlier.

A measure of speculative positions across 11 agricultural products dropped 19 percent to 293,785 contracts, the lowest since Sept. 17, the CFTC data show. The S&P’s Agriculture Index of eight commodities is down 20 percent this year.

Corn, Sugar

Money managers held a net-short position in corn of 146,086 contracts, compared with 139,060 contracts a week earlier. Sugar holdings fell 18 percent to 136,545 contracts, the biggest decline since early September, and cotton wagers dropped for the seventh straight week.

Farmers in the U.S., the world’s biggest corn grower, are projected to produce a record 13.989 billion bushels of the grain this year. Soybean output will be 3.258 billion bushels, the third-biggest ever, government forecasts show. Global food costs tracked by the United Nations are 14 percent below the all-time high set in February 2011.

“We’re seeing much better supply in the grain space,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $112 billion of assets. “For base metals, in particular for copper, it’s going to take a few more months of much better demand to start to absorb the excess supply.”