Hedge funds’ combined holdings in gold futures rose the most this month as continued U.S. monetary stimulus spurred investors to sell short contracts and sent prices toward the first quarterly advance in a year.

The net-long position in bullion jumped 12 percent to 78,654 futures and options in the week ended Sept. 24, the most since Aug. 27, U.S. Commodity Futures Trading Commission data show. Long wagers gained 1.8 percent and short bets fell 17 percent, the biggest drop in four weeks. Combined net-long holdings across 18 U.S.-traded commodities climbed 1.7 percent, the first gain in September.

Gold rose 8.4 percent this quarter after a slump into a bear market in April spurred sales of coins, jewelry and bars. The Federal Reserve refrained from trimming bond buying this month, surprising investors. The pace of purchases could remain steady at $85 billion a month into January as policy makers wait for more signs of economic recovery, Fed Bank of Chicago President Charles Evans said Sept. 27. Bullion rose 70 percent from December 2008 to June 2011 as the central bank bought debt.

“The Fed has made it clear that the economy is weak, and the stimulus spigot will be open full-bore,” said John Stephenson, who helps oversee about C$2.7 billion ($2.6 billion) at First Asset Investment Management Inc. in Toronto. “That means they’re continuing to inject more into the money supply, and that is a bullish argument for gold.”

More Gains

Futures rose 0.5 percent to $1,339.20 an ounce on the Comex in New York last week. Gold rebounded 13 percent since reaching a 34-month low on June 28. It is still down 21 percent for the year, poised for its first annual retreat since 2000, as some investors lost faith in the metal as a store of value. The contract for delivery in December slid 0.9 percent to $1,327 at 1:30 p.m. in New York.

Seventeen traders and analysts surveyed by Bloomberg expect prices to rise this week, with seven bearish and three neutral. That’s the second consecutive bullish weekly survey, the first back-to-back positive outlook since July. The Standard & Poor’s GSCI Spot Index of 24 commodities fell 0.4 percent last week and the MSCI All-Country World Index of equities slid 0.6 percent. The Bloomberg Dollar Index, a gauge against 10 major trading partners, slipped 0.1 percent, and the Bloomberg U.S. Treasury Bond Index gained 0.5 percent.

Government Shutdown

Most analysts surveyed by Bloomberg Sept. 18-19 said they now expect the Fed to wait until a December meeting to reduce monthly bond buying. An August survey showed analysts forecast a cut in September. Future purchases will depend on changes in economic data, Fed Chairman Ben S. Bernanke said Sept 18. U.S. monetary stimulus and a budget debate among lawmakers that may lead to a government shutdown means gold prices may rise in the near term, Goldman Sachs Group Inc. said the same day.

The U.S. faced an impasse over raising the debt ceiling in 2011 before Congress approved a plan to head off a default. Gold reached a record $1,923.70 on Sept. 6, 2011. The Fed’s balance sheet swelled to a record $3.73 trillion after three rounds of so-called quantitative easing. Bullish gold bets more than doubled since reaching a six-year low in June, CFTC data show.

Gold will probably resume declines into next year as the U.S. economy improves, banks including Goldman, Citigroup Inc. and Morgan Stanley say. The Fed’s decision on tapering was only “deferred,” and bullion may average $1,270 in the last quarter of 2014, Barclays Plc said Sept. 27.

Consumer Spending

The U.S. economy grew at a 2.5 percent annualized rate in the second quarter after expanding 1.1 percent in the first three months of the year, and consumer spending rose in August for the fourth straight month, Commerce Department reports showed last week.

Bullion holdings in exchange-traded products fell 27 percent this year, erasing $58.9 billion from the value of the assets. Investors amassed a record 2,632.5 metric tons in December. The ETP hoard climbed amid concern that stimulus would spur inflation. U.S. consumer prices grew at a 1.5 percent annual rate in August, compared with a 10-year average of 2.4 percent, Labor Department data showed Sept. 17.

“Evidence of an improvement within the global economy as well as financial stability within the credit markets is a negative for the gold investor,” said Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co. whose company oversees about $130 billion of assets. “As the economy and the financial system heals itself, gold will continue to underperform other speculative asset classes.”

Commodity Inflows

Gold funds had inflows of $399 million in the week ended Sept. 25, according to Cameron Brandt, the director of research for Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Money managers added $536 million to commodity funds, the EPFR data show.

The net-long position in crude oil fell 2.1 percent to 275,098 contracts, the lowest since July 2, the CFTC data show. West Texas Intermediate, the benchmark U.S. grade, declined 1.7 percent to $102.87 a barrel last week. Crude inventories grew by 2.64 million barrels in the seven days ended Sept. 20, the first increase in four weeks, the Energy Information Administration reported Sept. 25.

Investors are holding a net-long position in copper of 5,284 contracts, up from net-short holding of 3,807 contracts a week earlier. Futures gained 8.7 percent since June, snapping three straight quarters of losses. A measure of net-long positions across 11 agricultural products climbed 11 percent to 299,877 futures and options. The S&P GSCI Agriculture Index (BUSY) of eight commodities added 2.1 percent last week, the biggest increase since July 12.

Cattle Wagers

Bullish cattle wagers climbed 38 percent to 39,155 contracts, the biggest gain in six weeks, CFTC data show. Prices on the Chicago Mercantile Exchange rose for an eighth straight session Sept. 27, the longest rally since November 2008, on the prospect of shrinking U.S. herds.

The S&P GSCI gauge climbed 92 percent from the end of 2008 through June 2011 as record stimulus by the Fed improved demand for grains, metals and energy products. The U.S. economy will expand 2.7 percent next year, from 1.6 percent in 2013, according to the median of as many as 81 economist estimates compiled by Bloomberg.

“The anticipation is there will be some level of growth improvement from continued liquidity and government spending coming from QE will ultimately find its way into raw-material prices,” said Jeffrey Sica, who helps oversee more than $1 billion of assets as the president of Sica Wealth Management in Morristown, New Jersey. “It would be positive for commodity demand.”

Sources; To contact the reporter on this story: Elizabeth Campbell in Chicago at [email protected] To contact the editor responsible for this story: Steve Stroth at [email protected]