Gold hedging drops 2.5% to 12-year low

Gold-mining companies reduced their hedges against lower prices by 2.5 per cent in the fourth quarter to the lowest in 12 years, GFMS Ltd. and Societe Generale said.

Hedges through forward sales, loans and options at the end of December fell to 43.3 million ounces, the lowest since 1994, from 44.4 million in September, London-based research company GFMS and Paris-based Societe Generale's Corporate and Investment Banking said in a report e-mailed yesterday. Hedgers sold gold for $525 an ounce while non-hedgers got $616, the report said.

Most producers increased their hedges when gold fell to a 20-year low in 1999. Since then, gold has more than doubled, forcing mining companies to buy on the ``spot,'' or immediately delivery, market to unwind hedges.

Toronto-based Barrick Gold Corp., the world's biggest gold producer, Johannesburg-based Gold Fields Ltd. and Newcrest Mining Ltd. of Melbourne, led the declines in hedging during the quarter, according to the report.