Gold hedging falls 2.1 mln oz in Jul-Sept - Mitsui

LONDON, Nov 8 (Reuters) - Gold hedging by mining companies fell 2.1 million ounces to 29.1 million in the third quarter of 2007 and is expected to fall by about 13 million ounces in the full year, a report said.

Hedging allows producers to lock in prices for future output, but it can backfire if metals prices rise above the hedged price. High gold prices XAU= have been prompting producers to lower their hedging positions.

The largest reduction was by Australian company Newcrest (NCM.AX), which cut its hedging position by 2.5 million ounces, as the company began a programme to close its entire 4.2 million hedging position, the report, sponsored by Mitsui Precious Metals, said.

Barrick Gold (ABX.TO), the world's largest gold producer, lowered its hedging position by 1.5 million ounces by converting fixed rate forward contracts into floating rate contracts, said the report, written by Virtual Metals and Haliburton Mineral Services.

"Mining companies continue to make hefty cuts to their hedge books, and it looks like the 2007 total dehedging will be a similar amount to that seen in 2003-2004, and 2006," Edel Tully, Head of Precious Metals Research at Mitsui Global Precious Metals, said.

"Given how much smaller the book is these days, dehedging seems more popular then ever," she said. (Reporting by Atul Prakash; Editing by Peter Blackburn)