By Mark Skousen, Forecasts & Strategies

I am recommending a new high-income fund for our model portfolio Gabelli Global Gold and Natural Resource Income Fund (GGN).

This is a closed-end fund that offers an 11% dividend yield. The fund generates monthly income and pays 14 cents a month in dividends by trading covered calls.

An investor uses a covered call when he holds a long position in an asset while writing (selling) call options on the same asset in an attempt to boost his return from that asset. GGN uses covered calls.

Writing covered call options on mining and energy stocks does limit the upside potential of your investments, but the double-digit percentage yield should offset the downside risks of investing in natural resources.

The Gabelli Natural Resource Income Fund has $1.2 billion under management. It invests in 107 stocks: 51% in gold mining companies (such as Newmont, Barrick, Kinross, and Randgold) and 45% in energy companies (such as Suncor Energy, and Halliburton), and then writes calls on these stocks.

An estimated 4% to 5% remains in cash. The expense ratio is 1.3%, which is reasonable, considering its active management.

GGN opened at $20 a share back in March 2005, and its high dividend has made up for the capital loss over the past six years.

Its average total return is 8% per year, compared with 2% for the S&P 500 Index. It is a closed-end fund and is selling close to its net asset value.

As a closed-end fund, GGN is selling at a slight premium over its NAV of $14.93 and has risen a bit from the time we recommended it on the hot line. But it's still a good buy and is making a comeback to its $19 price enjoyed in May.

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