It’s been a challenging year for gold and the related ETFs. Fading hopes for Fed rate cuts are pressuring the yellow metal and shifting the story to interest rates. This has undermined gold’s safe-haven reputation, as evidenced by its dour performance even amidst the ongoing conflict in Iran.
There is some good news, however. Some experts forecast a bullion rebound and that outlook is boosting the appeal of income-generating gold funds like the NEOS Gold High Income ETF (IAUI). The award-winning IAUI turned a year old last month and carries a distribution rate of 12.14%. Its income proposition could make it tempting for investors wanting to position ahead of a gold rebound. It’s certainly nice to be paid to wait and that’s usually not offered by traditional gold ETFs.
The compensation offered by IAUI is noteworthy because there’s ample sentiment among professional market observers that gold has second-half rebound potential. Samantha Dart, co-head of global commodities research at Goldman Sachs, is one example, as evident in a recent report.
“Gold is not done,” wrote Dart. “We continue to see further upside, driven by both structural and eventually cyclical factors.”
IAUI Can Reward Patient Investors
The $447.9 million IAUI is actively managed and sources income by writing call options on a major gold-backed ETF. That convenient income-generating approach results in a 30-day SEC yield of 2.02%. That type of compensation could certainly be appealing and especially at a time when gold prices are down, but positive fundamental catalysts are readily identified. Such catalysts include the possibility of emerging market (EM) central banks upping their gold purchases.
“Structurally, EM central bank diversification — following the 2022 freezing of Russia’s reserves — remains the anchor of our $4,900/toz end 2026 forecast,” added Dart.
Dart’s outlook is backed by broader industry data as well. A recent World Gold Council (WGC) survey revealed that nearly half of global central banks plan to increase their gold reserves over the next year. This buying activity is poised to establish a firm price floor — if not act as an upside catalyst — creating a strong tailwind for IAUI along the way.
While Goldman Sachs reported that investor interest in gold remains solid, other banks see the yellow metal as a profile in patience. A view that underscores the benefit of IAUI, which pays investors to wait.
“Our economists’ central scenario sees 10Y US real yields remaining above 2% through Q3, before declining gradually into year-end and into H1 2027. This underpins a neutral stance over the summer, with scope for a more constructive outlook later in the year as the opportunity cost of holding gold begins to ease,” according to Société Générale.
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