Annual demand for gold now exceeds 4500 metric tonnes. For years now, the ever growing gap between new mine supply and demand has been filled by a combination of scrap recovery, official sales and, most importantly, gold borrowed from central banks and sold into the market, much of it pursuant to hedging programs of producers like AngloGold. Its continuing policy, restated by Williams at Indaba, is to hedge mostly through forward sales up to one-half of its production for the next five years. The ad pointedly questioned whether AngloGold's role in driving down gold prices through heavy forward selling should be rewarded by allowing it to purchase Gold Fields, the country's second largest gold producer, which last week announced that it had used recent weakness in gold prices to close out its remaining forward sales. Anglo American has recently announced a reorganization of the De Beers companies amidst reports that De Beers wants to shed the image of a cartel in order to improve its access to the American market.
People buy diamonds out of vanity.
They buy gold because they are too stupid to think of any other monetary system which will work. Barrick Gold is also rumored to have designs on Gold Fields, possibly in conjunction with AngloGold. Barrick is controlled by Canadian financier Peter Munk through TrizecHahn Corporation, his flagship international real estate development company. Like AngloGold, Barrick operates an aggressive forward sales program, including the writing of call options to sweeten the returns from hedging. This tactic is particularly dangerous absent a high level of confidence in continued low gold prices.