How This Gold ETF Also Generates Income
Most gold funds offer straightforward bullion exposure, but the USCF Gold Strategy Plus Income Fund, ticker USG, layers in an income strategy. So how does that change the role USG can play in an investor's portfolio compared to conventional gold ETFs?
When we launched USG, we were looking at gold markets over time. Over the last 25 years, overall gold has actually outperformed the S&P 500 by a little bit, but you've had periods where it was very painful to own gold, or gold really didn't do anything. Over the long term, we've seen the same thing since monetary policy changed in 1971. Gold has had the opportunity to run ahead of inflation and the dollar. It's not just inflation protection, but actually potentially a risk asset.
When we looked at this and considered that you've got strong up periods, sideways periods, and down periods, a covered call strategy where you're selling calls on the gold positions that you own tends to improve performance over the long run. Now, we launched this fund right at the start of the most recent three-year run of superb gold returns, so we've trailed a bit.
If you get to the point where gold is toppy, where it goes sideways or even goes down, the income can offset some of that and actually add to your long-term risk-adjusted returns.
