This report analyzes the compelling performance of gold in the current market, positioning it as a standout asset class. It specifically evaluates GLDI, the UBS ETRACS Gold Shares Covered Call ETN, assigning it a 'hold' recommendation. The rationale stems from gold's robust upward trajectory and the current suboptimal risk-reward profile for covered call strategies. The analysis highlights gold's strong bull market, with the GLD exchange-traded fund achieving its most significant January performance since 2012, supported by technical indicators suggesting continued appreciation. Despite GLDI offering an attractive 15.8% yield from call option premiums, it has demonstrated weaker total returns and suffers from lower liquidity and broader bid/ask spreads compared to GLD. A more opportune moment for engaging with covered call strategies, such as GLDI, would be when GLD's implied volatility reaches 30%, which would enhance the risk-reward balance and income potential.
Gold has shown remarkable strength in the market, surpassing even the much-hyped AI sector. According to research by Bank of America Global, gold was the top-performing major sub-asset class in both 2024 and 2025. This sustained outperformance underscores the metal's resilience and growing appeal among investors seeking stability and growth. The GLD exchange-traded fund, a popular vehicle for gold investment, recorded its best January performance in over a decade, signaling a powerful bullish trend. Technical analysis further supports this outlook, pointing to a potential for continued gains for gold in the foreseeable future.
GLDI, designed to generate income through covered calls on gold, offers an appealing 15.8% yield, primarily from the premiums collected on these options. While this high yield is attractive for income-focused investors, a closer examination reveals certain trade-offs. Historically, GLDI's total returns have lagged behind those of GLD, indicating that the income generated might not fully compensate for the appreciation potential of holding physical gold or a direct gold ETF. Moreover, GLDI experiences lower liquidity and wider bid/ask spreads, which can impact trading efficiency and overall returns for investors. This suggests that while GLDI provides a steady income stream, it may not be the most efficient way to capitalize on gold's strong bull market if capital appreciation is the primary goal.
Considering these factors, a strategic approach to incorporating covered call strategies like GLDI into a portfolio is advised. Instead of immediately investing in GLDI, it is recommended to monitor GLD's implied volatility. An entry point where GLD's implied volatility reaches 30% or higher would create a more favorable environment for covered call strategies. At such levels, the premiums from selling call options would be significantly higher, offering an improved risk-reward balance and enhancing the income potential of GLDI. This patient and data-driven strategy ensures that investors can maximize their returns from both gold's appreciation and the income generated through covered calls, aligning with the dynamic nature of the gold market.
The current market dynamics highlight gold's exceptional performance, prompting a careful evaluation of investment products like GLDI. While gold continues its impressive rally, the timing for engaging with covered call strategies is critical. GLDI's high yield is enticing, yet its overall returns and market liquidity warrant caution. A more strategic entry, tied to GLD's implied volatility, could significantly enhance the attractiveness and effectiveness of such income-generating gold investments.