In simple terms, Hedging is selling (at today's prices) gold...

In simple terms, Hedging is selling (at today's prices) gold that is still in the ground ... if you can't get it out economically to meet delivery, then you're bankrupt (unless you can buy physical in the spot market instead ... highly unlikely).

Also, you are potentially missing out on huge profits if the gold price spikes.

When the gold price was low (close to production costs), many companies entered hedging contracts to simply stay in business. They have now sold at (say) $300 per oz when the current price is over $900. Many companies are unwinding their hedge book (I must confess, I'm not sure of the economics of this ... one assumes that they have to buy Contracts out at current prices).

Sometimes Banks will insist on hedging before granting loans (added Security).

From recollection, this had a lot to do with Sons of Gwalia's demise.