The funds and other large speculators held 74,432 so-called short contracts on May 14, U.S. Commodity Futures Trading Commission data show. That’s the highest since the data begins in June 2006 and compares with 67,374 a week earlier. The net-long position dropped 20 percent to 39,216 futures and options, the lowest since July 2007. Net-bullish wagers across 18 U.S.-traded raw materials rose 1.1 percent to 588,482, led by gains in hogs, corn and cotton.

Gold prices that surged sixfold in the past 12 years fell 19 percent in 2013, including a seven-session slump through May 17 that was the longest since March 2009. Soros joined funds managed by Northern Trust Corp. and BlackRock Inc. in cutting holdings of exchange-traded products in the first quarter. ETP assets are now at the lowest since July 2011 after some investors lost faith in gold as a store of value amid improving economic growth, low inflation and a rally in equities.

“Gold has faced disappointment after disappointment,” said John Stephenson, a senior vice president and fund manager who helps oversee about C$2.7 billion ($2.65 billion) at First Asset Investment Management Inc. in Toronto. “It’s had a 12- year run, but the whole fear-mongering that the world is going to end is just not working. So, I think that any last vestige of an investment thesis for gold has been stripped.”

Prices Slump

Gold futures fell 5 percent to $1,364.70 an ounce on Comex in New York last week. Prices slumped as Federal Reserve regional bank presidents including Richard Fisher of Dallas and Charles Plosser of Philadelphia called for a reduction of U.S. monetary stimulus. Fisher and Plosser don’t hold a policy vote this year. Seventeen analysts surveyed by Bloomberg expect bullion to fall this week, with eight bullish and three neutral.

The Standard & Poor’s GSCI Spot Index of 24 commodities climbed 0.4 percent last week, and the MSCI All-Country World of equities gained 1 percent. The dollar rallied 1.3 against a basket of six major currencies. A Bank of America Corp. Index shows Treasurys lost 0.2 percent.

Soros Fund Management LLC lowered its investment in the SPDR Gold Trust, the biggest bullion ETP, by 12 percent to 530,900 shares as of March 31, compared with three months earlier, a Securities and Exchange Commission filing showed May 15. The reduction followed a 55 percent cut in the fourth quarter last year. Paulson & Co., the top investor in the SPDR fund, maintained a stake of 21.8 million shares, now valued at $2.86 billion. Global ETP holdings slid 16 percent to 2,207.1 metric tons this year, valued at $96.5 billion.

Goldman Outlook

Gold’s slump “has been faster than we expected,” Goldman analysts led by Jeffrey Currie wrote in a May 14 report. A further drop in ETP holdings would “continue to precipitate this decline,” said the analysts, who forecast prices at $1,390 in 12 months. The metal will get “crushed” and trade at $1,100 in a year and below $1,000 in five years as inflation fails to accelerate, Ric Deverell, the head of commodities research at Credit Suisse Group AG, said in London on May 16.

Physical buying will help to support prices, said Paul Dietrich, the chief executive officer of Middleburg, Virginia- based Fairfax Global Markets, which oversees about $120 million.

India Premiums

Gold premiums in India, the world’s biggest buyer, more than doubled to $40 an ounce May 15 from $17 to $18 a day earlier, according to Bachhraj Bamalwa, a director at the All India Gems & Jewellery Trade Federation. China’s bullion demand jumped to a record 294.3 tons in the first quarter, the World Gold Council said in a report May 16.

Prices surged 54 percent since the end of 2008 as central banks printed money on an unprecedented scale to boost growth. The Federal Reserve is buying $85 billion of assets a month to stimulate the world’s biggest economy, while Japan is making monthly bond purchases of more than 7 trillion yen ($67.8 billion).

“The case for gold is still there,” Dietrich said. “All the central banks are joining in a massive printing of money. Physical demand may be helping provide a floor on prices, and while there’s not a lot of downside risk right now to gold, there is a lot of upside potential.”

Record Equities

Bullion fell in six of the past seven months. The S&P 500 Index of equities reached a record May 17 as the dollar climbed to the highest since July 2010 against six major currencies. The U.S. consumer-price index fell for a second month in April, government data showed May 16, and expectations for cost increases, as measured by the break-even rate for 10-year Treasury Inflation Protected Securities, reached the lowest since August the next day.

Money managers withdrew $883 million from gold funds in the week ended May 15, according to Cameron Brandt, the director of research for Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Total outflows from commodity funds were $1.15 billion, according to EPFR.

Raw materials are returning to a “normal state” from a “super cycle” for prices that saw “abnormal strength” in returns, Goldman said in the May 14 report. Returns for commodities as gauged by the S&P GSCI Enhanced Index will be 1.6 percent over 12 months. That’s down from an April 23 forecast of 2.5 percent.

Copper, Silver

Investors increased their bets on a rally for crude oil for a third week to 205,140 futures and options, the CFTC data show. The funds decreased wagers on declines for copper to 13,115 short contracts from 16,798 a week earlier. Silver holdings tumbled 72 percent to 1,413, the lowest since speculators were net-short on April 9.

A measure of speculative positions across 11 agricultural products jumped 15 percent to 270,486 contracts, the highest since March. Wagers on a corn rally increased 23 percent to 75,632 futures and options, a third straight gain. Cotton holdings rose the most since January.

Cotton prices climbed 15 percent this year, the biggest gain after natural gas among the 24 commodities tracked by S&P. Dry weather will extend a drought pattern through May 22 in West Texas, the top U.S. growing region, MDA Information Systems Inc. said May 17. U.S. production will fall 19 percent this year, the Department of Agriculture said May 10.

“Everything in the agricultural space depends on weather,” said Paul Christopher, the chief international strategist at Wells Fargo Advisors LLC in St. Louis, which helps manage $1.3 trillion. “There’s definitely a high probability of more pain to come in gold. If the dollar can continue to gain on the yen, I think we’ll continue to see people sell out of gold and look for the dollar or U.S. stocks.”