Gold de-hedging rises to 3.18 mln oz in Q3 -report

NEW YORK Tue Dec 1, 2009 2:33pm EST

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NEW YORK Dec 1 (Reuters) - The rate at which gold miners cut their hedging positions rose to 3.18 million ounces in the third quarter, up from 980,000 ounces in the second quarter, driven by Barrick's decision to eliminate its entire hedge book, an industry report said.

The quarterly report by Societe Generale and metals consultancy GFMS Ltd said that the sharp reduction left the global gold hedge book at 11.55 million ounces.

Hedging allows producers to lock in guaranteed prices for future output, but it can backfire if the price of spot metal rises above the hedged price. Buying back of outstanding hedge positions was a key element of demand in past years.

The report was released on a day when Barrick Gold Corp (ABX.TO), the world's No. 1 gold producer, said it has completed the elimination of all of its gold hedges as planned, a move that should remove what has been a big drag on its shares. [ID:nN01487894]

De-hedging by Barrick and AngloGold Ashanti (ANGJ.J) accounted for 85 percent of the total hedge elimination during the third quarter, the report said.

"Regarding fresh hedging, we still do not see strong signs of a return to outright hedging activities by producers potentially eager to lock in historically high prices, and would argue still that this would currently be frowned upon by investors," the report said. (Reporting by Frank Tang; Editing by Marguerita Choy) ((frank.tang@thomsonreuters.com; +1 646 223 6126; Reuters Messaging: frank.tang.reuters.com@reuters.net)) ((For help: Click "Contact Us" in your desk top, click here [HELP] or call 1-800-738-8377 for Reuters Products and 1-888-463-3383 for Thomson products; For client training: training.americas@thomsonreuters.com ; +1 646-223-5546))

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