Gold miners' outstanding forward sales jump 61 pct in Q2 -report

* Russia's Polyus Gold accounts for jump in Q2 hedging

* Forward sales will rise by net 40 T in 2014-report

LONDON, Oct 22 (Reuters) - The volume of gold sold forward by mining companies jumped 61 percent in the second quarter after Russia's Polyus Gold added a major new hedge position, an industry report showed on Wednesday.

In their quarterly Global Hedge Book Analysis, released on Wednesday, Societe Generale (Paris: FR0000130809 - news) and GFMS analysts at Thomson Reuters said they are predicting net hedging for the year of 40 tonnes, the most since 1999.

They forecast in July that gold producers would return to net hedging this year for the first time since 2011.

Volumes of hedging predicted for this year are still well below the levels seen in the late 1990s. Net producer hedging in 1999 reached 506 tonnes, according to GFMS data.

Hedging, or selling future gold production, allows miners of the metal to lock in prices for their output.

While it can protect producers when prices are falling, the practice can also stop them capitalising on a rising market, making it hugely unpopular during the decade-long bull run in gold that began in 2001.

GFMS and Societe Generale estimated in Wednesday's report that only around 1 percent of total global gold production to 2018 is covered by hedge structures over the same period.

Some new hedging has been seen so far in the third quarter, the report said, including from Norton Gold Fields and St Barbara (Other OTC: STBMF - news) , while Mexico's Fresnillo (Other OTC: FNLPF - news) recently indicated it may hedge 44 percent of production from a newly acquired project.

Nonetheless, Societe Generale and GFMS predicted net de-hedging in the second half of the year.

Despite the Polyus hedge, they said it would be "incorrect" to conclude that hedging has become more acceptable amongst gold mining companies and their investors.

"It could be argued that there is little incentive for producers to hedge at current gold prices, which have fallen so close to the industry average cost that producers near the top of the cost curve have already missed their chance to lock in positive margins," they said in the report.

"As many mine plans were formulated on the basis of higher gold prices seen during the previous two to three years, cost-cutting is proving a more compelling strategy for producers." (Reporting by Jan Harvey; editing by Susan Thomas)