Why Smart Entrepreneurs Buy and Sell Gold

Smart entrepreneurs are always on the lookout for profitable business opportunities to add to their investment portfolios. And experience has shown that they usually favor investments that generate cash flow over time.

But when you peep into the portfolios of many entrepreneurs, you'd see that many of them do buy and sell gold. It's actually surprising, since gold doesn't generate cash flow.

So, why exactly do smart entrepreneurs invest in gold despite that it doesn't fetch dividends? Here are some of the reasons.

1. Inflation

During economic crises, currencies get weaker, and this causes inflation. However, gold has been historically proven to be a hedge against inflation because it has always managed to maintain its value even when everything else is dropping in value.

So, rather than see all the money they've saved up suddenly drop in value, smart entrepreneurs invest in gold—and other precious metals like silver and platinum. And they can rest assured that they won't lose on this investment during economic meltdown.

2. Increasing demand

There is limited quantity of gold available on our planet, and this precious metal cannot be made artificially. So, the whole world has to maintain and recycle that limited quantity. However, the global demand for gold has been on the high side for ages because its value is globally acknowledged and it's intertwined into many cultures.

In 1900, one ounce of gold sold for around $20.67. By the end of 1950, the price had gone up to around $40.25, and presently it sells for a staggering $1,200 or thereabout. That's more than enough proof that the demand for gold is ever increasing. So, buying gold now with the aim of selling it in ten years’ time is a very smart idea. And guess what, the price of gold ten years ago was $635—half its present price.

3. Geopolitical uncertainty

There are times when people lose confidence in a national or regional government due to certain reasons. When this happens, investors are skeptical about investing in few or many aspects of that country or region's economy. And this might result in some economic hardship in affected areas.

However, gold is a surefire hedge against geopolitical uncertainty because its value doesn't drop in line with dwindling economic state. Entrepreneurs in areas affected by geographical uncertainty who have invested in gold can simply sell their gold for great prices in politically stable areas.

4. Portfolio diversification

While some entrepreneurs strongly believe in "putting all their eggs in one basket and watching that basket closely", most others—the smarter ones, in my opinion—believe it's safer to diversify your investment. Many entrepreneurs who subscribe to the latter opinion invest in gold not just as a long term investment option, but as a risk-spreading strategy. To them, if some of their investments fail, they can fall back on others that are thriving.

With all of the above in mind, you'd agree that gold is a good investment, provided you buy and sell it with the right mindset and at the right time. And you'd agree that entrepreneurs investing in gold are indeed smarter than others.

Author:.

Jimmy Rohampton is a freelance writer, blogger and business consultant from Southwest London. He travels the world and helps people master blogging and online marketing at HowToCreateABlog.org. Think you're interesting and he should know you? Say "Hi" to him at Jimmy@HowToCreateABlog.org

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