Gold hedging falls 8 pct in Oct-Dec 2007 - report

LONDON, April 21 (Reuters) - Gold miners cut their hedging positions by 8 percent to 26.86 million ounces in the fourth quarter of 2007 from the previous three months, with the full year decline setting a record of 14.34 million, a report said.

But the quarterly report by Societe Generale and metals consultancy GFMS Ltd. said there was increasingly limited scope for a significant reduction in the global hedge book in 2008.

Hedging allows producers to lock in prices for future output, but can backfire if values rise above the hedged price.

Strong gold prices XAU= have prompted producers to trim their hedging positions. Gold hit a record high of $1,030.80 an ounce in mid-March and was quoted at around $920 on Monday. It has jumped 45 percent since the start of 2007.

The report said that Barrick Gold (ABX.TO) and AngloGold Ashanti (ANGJ.J) now accounted for 70 percent of the global hedge book and there were indications that their intention was to gradually reduce outstanding positions.

"Bearing this in mind, there is a relatively low probability of AngloGold Ashanti taking the approach of other major producers last year of slashing positions quickly in sizeable portions," the report said.

High gold prices had also made gold buy-backs expensive for companies, it added.

"Further, with the credit crunch still looming in the background, companies that lack a strong balance sheet may find it difficult to obtain sufficient credit at these high prices to re-purchase unwanted contracts."

"However, with current prices greatly exceeding the marginal cost of most producers, should gold's rally falter and threaten the handsome margins currently available, then we could envision a meaningful return to hedging - potentially as early as the latter stages of this year." (Reporting by Atul Prakash; editing by Peter Blackburn)