Gold price decline temporary, says hedge fund manager Lamm
Australian hedge fund manager Raphael Lamm said the recent decline in gold prices is temporary, as the forces behind its long-term rally remain intact. He cited US government debt of more than $40 trillion and growing central-bank allocations as medium- to long-term supports. The A$1.5 billion L1 Gold Fund he co-manages with Mark Landau has returned a net 235% through August since launching in February last year. Bullion traded at $4,286.01 an ounce Thursday evening in Sydney.
Source
Livemint — Markets · read the original report ↗
Desk check · compared with the source
What the desk checked (5)
- L1 Gold Fund returned a net 235% through August since its February launch last year — Attributed to a fund spokesperson in the source; not independently verified.
- Gold traded at $4,286.01 an ounce on Thursday evening in Sydney and is down about 16% since the US-Iran war erupted in late February — Figures appear in source as Bloomberg reporting; no separate attribution given.
- US government debt exceeds $40 trillion and will support gold prices — Stated by Lamm as his argument; opinion plus a figure he cites, unverified here.
- OceanaGold acquired Ausgold at A$1.36 a share; the fund bought in at about A$0.50 — Attributed to an August investor update cited in the source.
- L1 Gold Fund raised A$160 million ($114 million) via an entitlement offer in August and posted a net 18% return through August — Attributed to the fund's most-recent statement.
Analysts’ view opinion
This is one fund manager's view on gold, not a forecast — but the economic logic behind it deserves attention: US government debt above $40 trillion and steady central-bank buying are, in effect, demand rooted in doubts about monetary credibility. The bearish case is just as economic: since January's record, higher energy prices and bets on Fed rate hikes have pressured a metal that pays no yield. What is really being contested here is long-run fiscal distrust versus short-run real interest rates.
- Lamm's fund returned a net 235% while physical gold rose about 55% over the same period — meaning most of the gain came from stock selection, gearing to mining equities and hedging, not from the gold price itself.
- The winners are clear: miners, their shareholders and super/pension investors; the payers are jewellery buyers and retail investors entering at elevated prices.
- Holding a low- to mid-60% net long position and trimming only if further upside materialises is cautious optimism, not an unqualified bull call.
- Whether the fall proves temporary hinges on inflation data, real rates and the course of the US-Iran war — variables no single fund controls.
- Continued mining M&A, such as the Ausgold acquisition, could re-rate development-stage companies and deliver returns largely independent of the gold price.
What to watch — Watch US inflation prints, the Fed's rate path and the Iran conflict — falling real rates would strengthen Lamm's case, while rising ones could extend the pressure on bullion.
This is an interested investor's opinion rather than established fact: he is net long gold equities, and the fund's past returns are no guide to future performance.
Deep dive
Research brief · 8 facts · 6 dates · exam-readyThe brief
Context
Gold has been in a long rally driven by fiscal worries and central-bank buying, but has slipped from a record set in January amid surging energy prices, expectations of US Federal Reserve rate hikes and the fallout of the US-Iran war that erupted in late February. Australian hedge fund manager Raphael Lamm, who co-manages the A$1.5 billion ($1.1 billion) L1 Gold Fund with Mark Landau, argues the slide is temporary because the structural drivers of gold demand are intact. His long-short fund buys gold-related equities while shorting gold futures as a hedge, and has returned a net 235% through August since launching in February last year. Bullion traded at $4,286.01 an ounce on Thursday evening in Sydney.
Key facts
- Lamm cites US government debt of more than $40 trillion and the "unsustainability of fiscal situations in key markets" as medium- to long-term support for gold.
- Gold is down about 16% since the US-Iran war erupted in late February, after hitting a record in January; bullion traded at $4,286.01 an ounce on Thursday evening in Sydney.
- The L1 Gold Fund manages A$1.5 billion ($1.1 billion) and has returned a net 235% through August since its February-last-year launch.
- Over the same period, VanEck Gold Miners ETF gained about 148% and physical gold prices rose 55%.
- The fund is part of Melbourne-based L1 Group Ltd., which manages about $14 billion in assets.
- Lamm increased long positions aggressively when gold fell below $4,000 and is now at low- to mid-60% net long.
- An entitlement offer in August raised A$160 million ($114 million); Lamm and Landau both raised personal stakes in the fund.
- The fund listed on the Australian exchange in April and posted a net 18% return through August even as gold prices fell 6%.
Timeline
- February last yearL1 Gold Fund launched by Raphael Lamm and Mark Landau.
- JanuaryGold hits a record high, then comes under pressure.
- Late FebruaryUS-Iran war erupts; gold falls about 16% from then.
- AprilL1 Gold Fund lists on the Australian exchange.
- AugustEntitlement offer raises A$160 million ($114 million); fund reports net 235% since launch and net 18% since listing; investor update flags Ausgold gains.
- Thursday evening (Sydney)Bullion trades at $4,286.01 an ounce.
Who has a stake
- Raphael Lamm and Mark Landau — Co-managers of the L1 Gold Fund who have also raised personal stakes through the August entitlement offer.
- L1 Group Ltd. (Melbourne) — Manages about $14 billion; its gold fund's performance and reputation ride on the gold call.
- L1 Group's clients — Large superannuation funds, pension funds, family offices, high net worth and retail investors exposed to fund returns.
- Central banks — Growing gold allocations cited as a structural driver of demand and prices.
- Gold miners and developers (Eldorado Gold, K92 Mining, Ausgold, OceanaGold) — Valuations, M&A outcomes and development pipelines affected by bullion prices.
- US Federal Reserve / US fiscal authorities — Rate-hike bets and debt above $40 trillion shape the direction of non-yielding gold.
Why it matters
Gold is a barometer of confidence in sovereign finances and monetary policy; a debate over whether its fall is a correction or a turn affects central banks, pension money and retail savers alike. For investors, the story shows how a long-short equity strategy can massively outperform both physical gold and gold-miner ETFs, and how mining M&A can amplify returns. It also frames the near-term risks — the US-Iran war, real interest rates and inflation data — that will decide gold's path.
UPSC angle
Prelims pointers
- Bullion traded at $4,286.01 an ounce on Thursday evening in Sydney, down about 16% since the US-Iran war began in late February.
- US government debt is more than $40 trillion, cited as a structural support for gold.
- L1 Gold Fund: A$1.5 billion ($1.1 billion), net 235% return through August since February-last-year launch; listed in April.
- L1 Group Ltd., Melbourne, manages about $14 billion in assets.
- Comparators over the same period: VanEck Gold Miners ETF up about 148%, physical gold up 55%.
- K92 Mining operates the Kainantu Gold Mine in Papua New Guinea; Eldorado Gold is the fund's biggest position.
Mains framing
Gold's recent slide, about 16% since the US-Iran war erupted in late February and after a record in January, has been driven by cyclical headwinds — surging energy prices and bets on Federal Reserve rate hikes, which penalise a non-yielding asset — while the structural drivers cited by fund manager Raphael Lamm remain unchanged: unsustainable fiscal positions in key markets, notably US government debt above $40 trillion, and rising central-bank allocations to bullion. The implication is a divergence between near-term volatility, set by geopolitics, real interest rates and inflation data, and a medium-term demand floor built on sovereign-risk hedging. Lamm's response has been to add to long gold-equity positions below $4,000 an ounce, sit at low- to mid-60% net long, short expensive or operationally weak gold stocks, and lean on mining consolidation, as with OceanaGold's A$1.36-a-share purchase of Ausgold, bought at about A$0.50. The lesson for investors and policymakers is that gold exposure through equities carries both higher upside (net 235% versus 55% for physical gold) and higher idiosyncratic risk, so disciplined hedging, valuation focus on near-term cash flows, and attention to the macro triggers matter more than directional bets on bullion alone.
Key terms
- Long-short fund
- A fund that holds long positions expected to rise (here gold equities) while shorting others or futures as a hedge.
- Net long
- Long exposure minus short exposure; L1 Gold Fund is at low- to mid-60% net long.
- Entitlement offer
- An offer of new units/shares to existing holders; L1's August offer raised A$160 million ($114 million).
- Non-yielding metal
- Gold pays no interest, so higher real interest rates typically reduce its appeal.
- VanEck Gold Miners ETF
- An exchange-traded fund tracking gold mining stocks, used here as a performance benchmark (up about 148%).
- Mid-cap gold equities
- Medium-sized gold miners/developers; Lamm calls it an addressable market cap of over a trillion dollars.
Practice questions
- Gold prices are influenced by both cyclical and structural factors. Examine the drivers cited in the L1 Gold Fund manager's assessment and their implications for investors and central banks.
- How do rising sovereign debt levels and central-bank gold buying interact to shape bullion prices over the medium term? Discuss with reference to recent market movements.
- Compare investing in physical gold with investing in gold-mining equities through a long-short strategy, using the performance figures reported for the L1 Gold Fund.
Grounded only in the source report — figures and dates are the source's, not inferred.