You are advising an Australian gold mining company on how to hedge their gold price risk and foreign exchange risk (gold is priced in USD) using derivatives.

1. What are the pros and cons of using exchange traded derivatives versus OTC derivatives?
2. Comparing the advantages and disadvantages of options, futures, and forward contracts, which type(s) of contracts would you recommend?
3. What factors could contribute to hedging errors if exchange traded derivatives are used for hedging?
4. What other factors would you consider when designing the hedging strategy? Are there reasons to deviate from a fully-hedged position?