If you’re thinking of investing in gold, you should know that there are many ways to go. First of all, you could buy physical gold, such as coins or bars. Then, there is the idea of buying ETF certificates or individual mining stocks, as this way you will avoid all the transportation and storage hassle that physical gold implies. If this isn’t the thing for you either, derivatives are another extremely popular choice.

As a definition, derivatives are financial instruments whose value derives partly from that of another asset, called an underlying security. To be more exact, it is sort of like a bet as to what the value of the underlying asset will be in a particular period of time. Such instruments are used in order to protect prices and potential future investments.

Gold derivatives come in many shapes, each of them having a particular set of qualities that set them apart. For instance, forward contracts imply that the buyer is obliged to buy or sell the underlying asset at an ulterior time, but at today’s future price. On the other hand, futures are different because they are standardized and exchange traded.

Then, there are futures. These are contracts that oblige the buyer to purchase a certain amount of gold (or another commodity) on a set date and at a specified price. If we were to compare the two, the main difference between a futures contract and an options one is that the former forces the buyer to make the transaction, while the latter only gives him that possibility.

Finally, you can see that there are many ideas from which you can choose. It’s only a matter of analyzing the advantages and disadvantages of each investment opportunity and deciding which one works best for you.

If you want to make a sound investment, consider buying gold bullion bars.