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Gold hedging positions ofmining companies fell 18 percent to 22 million ounces in the first quarter of2008, a report said on Friday, forecasting a full-year drop of 10-12 millionounces.

Hedging allows producers tolock in prices for future output, but it can backfire if metals prices riseabove the hedged price. High gold prices have prompted producersto lower their hedging positions.

The report sponsored byFortis Bank said the decline was mainly due to four gold mining companies.

AngloGold Ashanti reduced 1.2 millionounces of hedging, Barrick cut 1.1 million ounces, Buenaventura closed out their entire hedging positions of 0.9 million, while Newcrest removed 0.7 million ounces.

The report, prepared by theVM Group and Haliburton Mineral Services, said hedging positions could fall tojust 15-17 million ounces by the end of 2008, after considering AngloGold'sannouncement to close another 3.8 million ounces of hedges.

It also said thatexchange-traded funds suffered in April, with gold held by StreetTRACKS, the world's largest gold-backed ETF falling 62.50tonnes.

Official sector sales ofgold have slowed as the signatories of the Central Bank Gold Agreement struggleto reach a combined sales limit of 500 tonnes a year.

"Unless a central banksuch as that of Spain or Portugal resumes sales, it is likely thatcollectively they will undershoot the limit by over 100 tonnes," thereport said.

(Reporting by Atul Prakash;editing by Chris Johnson)

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