While increased debt has plagued many companies. Barrick and Placer Dome Inc., among others, have been able to hedge their debt successfully. Yet even the good times were bad. Where they were making their money was hedging profits. What the companies have been doing is to sell tomorrow's production at today's price.
Dealers then supply gold from their own vaults or borrow it from central banks.
They pay it back when the gold is produced. The Netherlands, Australia and Argentina last year sold substantial portions of their holdings. In fact, the Belgians sold to five other central banks so the gold never came into circulation. Last week, the industry told central banks the sector was about to take a whole new tack. They should be focusing on producing gold at a profit and not worrying about moving the inventory.