IAUI ETF: Gold & Covered Call Income in 2025

The NEOS Gold High Income ETF (BATS:IAUI) entered the market on June 5, 2025, positioning itself at the intersection of two powerful investment trends. While the fund itself is new, carrying what skeptical investors might call ‘new-fund risk,’ it connects to one of humanity’s oldest stores of value: gold. The timing appears strategic, given gold’s extraordinary performance in 2025, rocketing from approximately $2,650 per ounce at the start of the year to recently hitting $4,000 – a staggering 51% gain that has outpaced both the S&P 500 and NASDAQ 100.

Despite gold’s impressive run, passive income investors have traditionally faced a limitation with physical gold: it generates no dividends or distributions. This is where the NEOS Gold High Income ETF aims to differentiate itself, combining gold exposure with the income-generating power of covered call strategies that have become increasingly popular in the ETF space throughout 2025. The fundamental question remains whether this new fund can successfully extract meaningful income from gold or gold-like assets while managing the inherent risks of its innovative approach.

Prospective investors must understand that the NEOS Gold High Income ETF does not provide direct exposure to physical gold. Instead, the fund employs synthetic options-trading strategies to achieve indirect, approximate exposure to gold price movements. This involves buying call options and selling put options on the well-established SPDR Gold Trust (NYSEARCA:GLD), creating a complex derivatives-based approach rather than straightforward gold ownership.

The performance divergence between this strategy and direct gold ownership has been substantial in 2025. While gold prices have climbed 51%, the IAUI ETF’s share price has gained approximately 8% year-to-date. This significant performance gap highlights the fund’s limited gold price correlation and underscores the derivatives-trading risks inherent in its strategy. The fund’s prospectus clearly states there’s no assurance that its options-trading approaches will achieve results similar to holding physical gold bullion or pure gold ETFs.

Beyond its synthetic options positions, the NEOS Gold High Income ETF further diversifies its holdings by including shares of the Goldman Sachs Physical Gold ETF (BATS:AAAU) and U.S. Treasury bonds. This multi-asset approach means IAUI is not a ‘pure gold’ ETF, and investors seeking direct gold exposure might consider pairing it with GLD, AAAU, or physical gold to achieve their desired allocation.

Where the NEOS Gold High Income ETF distinguishes itself is through its impressive income generation capabilities. The fund sells covered calls against its synthetic gold-ETF option positions, creating a revenue stream that translates to an expected annual distribution rate of 12.63%. This substantial yield comfortably covers the fund’s 0.78% expense ratio and represents a compelling value proposition for income-focused investors.

The distribution structure offers additional advantages for portfolio management. Unlike physical gold, which generates no ongoing income, IAUI pays distributions on a monthly basis, providing frequent reinvestment opportunities and regular cash flow. This monthly payment schedule aligns well with the needs of retirement-focused investors and those seeking to compound returns through systematic reinvestment.

The convenience factor also merits consideration. Owning the NEOS Gold High Income ETF eliminates the logistical challenges associated with physical gold ownership, including purchase complications, storage costs, and insurance requirements. For investors who want gold exposure without the hassles of physical possession, IAUI offers a streamlined alternative that combines accessibility with income generation.

The fundamental trade-off with the NEOS Gold High Income ETF lies in balancing its high distribution yield against its limited gold price correlation. Investors attracted to the 12.63% expected annual yield must accept that the fund will not precisely mimic the profit-and-loss profile of physical gold or pure gold funds like GLD and AAAU. The 8% price appreciation versus gold’s 51% surge in 2025 clearly illustrates this divergence.

For income-focused investors, however, the trade-off may be worthwhile. The combination of monthly distributions, professional management by NEOS, and indirect gold exposure creates a unique investment proposition. The fund’s structure allows investors to participate in gold’s potential upside while generating substantial income – something impossible with physical gold alone.

As with any investment involving derivatives and complex strategies, thorough due diligence is essential. Investors should carefully review the fund’s prospectus and understand the specific risks, including deviation from gold price movements and derivatives-trading exposure. For those comfortable with these risks and seeking high yield with some gold market participation, the NEOS Gold High Income ETF represents an innovative addition to the covered call ETF landscape that just might establish new standards for income-generating precious metal funds.