CHICAGO: Investors cut bullish commodity bets to the lowest in almost six months as US budget talks stalled, increasing concern that lawmakers’ failure to reach an agreement will push the world’s biggest economy back into a recession.

Hedge funds and money managers reduced net-long positions across 18 US futures and options by 5.6% to 758,256 contracts in the week ended December 18, the lowest since June 26, US Commodity Futures Trading Commission data show.Gold holdings dropped to the lowest since August, while those for silver tumbled 14%, the most since July 24. Traders turned bearish on wheat for the first time in six months.House Republican leaders scrapped a plan to allow higher taxes on December 21. Lawmakers won’t vote until after Christmas holiday on ending the showdown over $600 billion of automatic tax increases and spending cuts scheduled to start in January.US consumer confidence fell to a five-month in December as Americans grow more concerned about the possibility of higher taxes, figures showed the same day."What you have is a re-pricing of risk on concerns of no resolution to the fiscal cliff," said Jeffrey Sherman, who helps manage more than $50 billion of assets for DoubleLine Capital in Los Angeles."By going over the cliff, for the consumer, you have less money in the system and therefore less economic growth."The Standard & Poor’s GSCI Index of 24 commodities dropped 1.8% this month. The MSCI All-Country World Index of equities added 2%, and the dollar slid 0.6% against a basket of six trading partners.Treasuries lost 0.6%, a Bank of America index shows. The Thomson Reuters/University of Michigan US consumer sentiment index fell to 72.9 in December, the weakest since July. Economists in a Bloomberg survey projected a final reading of 75.Congress won’t reach a deal this year on a budget plan, Representative Kevin Brady, a Texas Republican, said in an interview. The Congressional Budget Office says failing to avert the fiscal cliff may cause a recession in 2013.The index of US leading indicators fell in November, pointing to a slowdown in the economy early next year, data from the Conference Board showed December 20.The Federal Reserve lowered its outlook for growth next year to 2.3% to 3% on December 12, and Chairman Ben S Bernanke warned that the central bank "doesn’t have the tools" to counter the risks to the economy should Congress not reach a budget deal.The US economy will probably be resilient and support rising demand for commodities, said James Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management, which oversees about $325 billion of assets.Third-quarter growth beat economists’ forecasts as gross domestic product accelerated at a 3.1% annual rate, the Commerce Department said December 20.

The World Bank raised its forecast for 2012 growth in East Asia a day earlier to 7.5% from an October projection of 7.2% after China’s economy recovered. China is the biggest consumer of everything from cotton to copper, and the US uses the most crude oil and corn.

Money managers withdrew $445.9 million from commodity funds in the week ended December 19, the most since July, according to Simon Ringrose, a managing director at Cambridge, Massachusetts-based EPFR Global, which tracks money flows.Gold and precious- metal funds had a net outflow of $327 million. Investors increased their bets on declining naturalgas prices, holding a net-short position of 64,285 contracts, the CFTC said. That compares with 49,582 a week earlier and is the most bearish since June 19. Bets on West Texas Intermediate oil rose 19%, the most since August.