Gold miners cut hedges in third quarter: report

NEW YORK (Reuters) - Gold mining companies in the third quarter resumed cutting back hedges against possible gold price declines, reversing a trend from the previous quarter when producers’ forward sales briefly increased, a quarterly report by Societe Generale and metals consultancy GFMS Ltd said.

Hedging helps producers lock in prices for future output, but it can backfire if spot metal prices rise above the hedged price. The buying back of outstanding hedge positions was a key element in gold’s rally over the past decade.

The price of spot gold rose 5.4 percent in the third quarter.

Gold miners in the third quarter removed hedges by buying back 2.16 million ounces of their forward sales, leaving the global gold hedge book at 5.11 million ounces at the end of September, the report said.

In the second quarter, the GFMS/SocGen report showed, the global hedge book increased 160,000 ounces on a net basis, largely due to increased forward sales by smaller gold producers.

AngloGold Ashanti ANGJ.J, Africa's biggest gold miner, was the largest de-hedger, removing 1.73 million ounces in the quarter as it initiated the hedge book termination.

The report said the volume of de-hedging is expected to total 4.65 million ounces for the year as the remainder of AngloGold Ashanti’s hedge position closed early in the fourth quarter.

Reporting by Frank Tang