2025's Hottest CEF Is a Trap. Here's What to Buy Instead for 9% Dividends

The ASA Gold & Precious Metals Fund has surged about 172% in 2025 but yields only 0.1% versus an average CEF yield of ~8.3%, and its two‑decade NAV performance trails both the S&P 500 and the GLD gold ETF—making it a poor choice for income-focused investors and vulnerable to recency bias if gold retreats. The author recommends higher‑income, better‑valued CEF alternatives: Adams Diversified Equity (ADX) at a ~7.1% discount and Liberty All‑Star (USA) at ~10% discount—both with blue‑chip equity exposure—and PIMCO Corporate & Income Opportunity (PTY), a 10.9%‑yielding monthly payer (trading at a 10.1% premium but well below its 52‑week average premium), which together form a “mini‑portfolio” averaging roughly 10% yield and have outperformed ASA since the early 2000s. Looking ahead, the author argues against chasing gold and instead favors rotating into select AI‑focused CEFs that can deliver 8%+ dividends while providing exposure to both AI providers and corporate AI users for income plus growth potential in 2026.

Analysis

The ASA Gold & Precious Metals Fund (ASA) has delivered a dramatic 172% total return so far in 2025, driven by a surge in gold and exposure to miners, yet it offers only a 0.1% distribution compared with an average CEF yield near 8.3%, making it a poor fit for income-focused allocations. ASA’s short-term outperformance masks pronounced long-term weakness: on a total-NAV-return basis the fund has trailed both the S&P 500 and the GLD gold ETF since 2004 and experienced an extended multi-year drawdown in the 2010s that would have penalized retiring investors. The author highlights higher-income, better-valued CEF alternatives—Adams Diversified Equity (ADX) at a 7.1% discount and Liberty All-Star (USA) near a 10% discount for equity exposure, plus PIMCO Corporate & Income Opportunity (PTY) yielding 10.9% and trading at a 10.1% premium versus a 19.7% 52-week average—producing a suggested "mini-portfolio" averaging roughly 10% yield. Given the risk of recency bias and the absence of current income to cushion a reversal in metals, the piece argues rotating away from gold-focused CEFs and into selective high-yield or AI-focused CEFs that can deliver 8%+ dividends while watching valuation and discount/premium dynamics closely.

Key Decisions for Investors

• Do not initiate ASA positions for income investors given its 0.1% yield and documented long-term NAV underperformance despite a 172% YTD spike
• Reallocate consideration to higher-yield, discount-trading CEFs highlighted in the article—ADX (≈7.1% discount) and USA (≈10% discount)—and evaluate PTY for corporate credit exposure at a 10.9% yield while noting its 10.1% premium is below its 52-week average
• Protect gains in gold-linked positions by trimming or setting clear profit targets and monitor gold price momentum and NAV trends to avoid recency-bias-driven reversals
• Consider selective exposure to AI-focused CEFs that the author flags for 2026 if they offer 8%+ sustainable dividends, but limit sizing, confirm dividend sustainability and prefer funds trading at discounts to NAV