Gold prices slumped mightily since the start of the war in Iran, putting a dent in one of its most intense bull markets in recent memory. However, some experts believe the yellow metal will eventually resume its bullish ways.
For investors looking to make that bet while earning yield along the way, the NEOS Gold High Income ETF (IAUI) merits consideration. The award-winning IAUI is just 13 months old and has already cemented itself as one of the leaders among income-generating gold ETFs — a concept that was previously virtually unheard of. The NEOS ETF carries a 30-day SEC yield of 2.35%, making it an income-friendly alternative to traditional gold ETFs, which don’t pay dividends or interest.
The actively managed IAUI sources its impressive income stream by writing call options on a basic, physically backed gold ETF. That methodology is approachable and understandable for a broad swath of investors, many of whom are gold-inclined and want to elevate their income while waiting for bullion to rebound.
Good Time to Investigate IAUI
After breaking through $5,000 an ounce earlier this year, gold tumbled and traded slightly below $4,100 an ounce on Monday. That situation may not last long. Underscoring the potential viability of IAUI, some experts believe that the commodity could eventually climb back toward $6,000 an ounce.
“While gold’s two-year rally has taken a pause that refreshes, we believe that this bull market has only just begun,” said Maison Placements President John Ing in a report out last week. “We continue to expect gold to reach $6,000/oz as part of its multi-year bull market.”
Said another way, if Ing’s forecast is accurate, gold could have nearly 50% upside from current levels. The catch is that it could take some time to get there — and that’s precisely what makes IAUI attractive, as investors can earn yield while waiting for the rebound.
There are reasons to believe that a resurgence could materialize, with the Federal Reserve playing a large role in that scenario. This year, the Fed is pinching gold because it hasn’t cut interest rates and some market observers believe rate hikes may be in the cards.
Looking further out, as Ing noted, the Fed can’t continue meeting demand for Treasuries without expanding U.S. monetary supply. That expansion is inflationary and could be a positive for gold. A prolonged period of inflation would also reinforce the value of IAUI’s income component, as its distributions could potentially match or exceed inflation rates over time.
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