The ongoing conflict in Iran has been a drag on gold prices, frustrating investors who believed the commodity would stand tall during times of geopolitical turmoil.
Gold’s recent woes are easily explained. The yellow metal didn’t positively respond to the war in Iran because the conflict resulted in oil prices spiking, leading to realized fears of higher inflation. With inflation resurgent, the Federal Reserve has limited leeway to lower interest rates, meaning bond yields could remain elevated, diminishing the allure of gold in the process because bullion doesn’t offer dividends or coupon payments.
Thanks to the NEOS Gold High Income ETF (IAUI), gold and income meet under roof and that could be appealing to investors wanting to maintain exposure to the commodity while interest rates remain somewhat high. IAUI, which turns a year old in June, sports a 30-day SEC yield of 1.72%, which is highly appealing relative to a broad swath of the fixed income ETF universe.
A Good Time to Investigate IAUI
The $426 million IAUI is an options-based ETF. Hence the impressive income stream, but investors should note the NEOS fund offers some upside potential in the event of a rebound, which could happen if real rates decline.
“If rates drop, that’s going to be good for gold; if rates rise, that’s going to be bad for gold. I think that’s basically where we’re at. The 4.30 level is an area a lot of people will be watching closely because as we shoot above that level, that generally has meant bad things for not only gold but just any risk asset,” reported Christopher Lewis for FXEmpire.
With IAUI’s high income, investors earn compensation while waiting for gold to rebound – a feature not found with traditional bullion ETFs. IAUI’s status as an income-generating play on gold is potentially compelling today because much of the smart money remains bullish on bullion. For example, J.P. Morgan Private Bank believes gold can trade as high as $6,000 to $6,300 per troy ounce this year with global central banks remaining dedicated buyers.
“The outlook of central bank purchase remains strong, as a record of 43% of 73 global monetary authorities believe their own gold reserves will increase over the next year. There are several reasons for this, but it has become apparent that countries facing elevated geopolitical risks (such as those on the borders of the Russia-Ukraine war), are increasing their gold reserves,” according to J.P. Morgan.
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