Bullion pullback won’t derail longer-term rally, says L1 Gold Fund

Raphael Lamm, co-manager of Australia's L1 Gold Fund, asserts that the recent drop in gold prices is a short-term setback, citing high government debt and ongoing central bank demand as long-term support for the precious metal, as cited by Bloomberg. Lamm and co-manager Mark Landau oversee a AUD1.5bn ($1.1bn) long-short gold strategy, which has delivered a net return of 235% since its launch in February 2025.

Lamm attributes the decline in gold prices to deteriorating fiscal conditions in major economies, especially the US, alongside continued purchases by central banks. In the near term, he anticipates gold's volatility in response to the US-Iran conflict, interest rates, and inflation data. Gold has slipped by approximately 20% since the start of the US-Iran conflict in late February.

The L1 Gold Fund combines gold-mining companies' long positions with short gold futures to hedge against commodity price fluctuations. Since its inception in August, the fund has generated a 235% net return, outperforming the VanEck Gold Miners ETF by 148% and physical gold by 55% over the same period. Lamm and Landau have increased their exposure to gold equities due to recent weakness in the metal.

Currently, the fund holds a net long position between 60% and 65%, up from earlier when they boosted their position after gold dipped below $4,000 an ounce. The fund primarily invests in large gold companies with market caps of at least $5bn and shorts mining stocks they deem overpriced or facing operational issues. Lamm believes the fund will maintain long exposure unless gold prices rise significantly to realize their upside potential.

The strategy's gains have also been driven by stock selection and corporate actions within the mining sector. Its top holding is Canadian gold producer Eldorado Gold, and the fund owns the largest share of K92 Mining, operating the Kainantu gold mine in Papua New Guinea. Lamm predicts industry consolidation will present opportunities, particularly for mid-cap developers that could attract interest from larger producers.

The fund benefited from OceanaGold's acquisition of Australian miner Ausgold at a discount. L1 has raised A$160m through an entitlement offer in August, with Lamm and Landau participating. Despite a 6% drop in gold prices during August, the fund returned 18% net to investors.