L1 Gold Fund: Pullback won’t halt longer-term gold rally

Raphael Lamm, co-manager of Australia’s L1 Gold Fund, described the recent decline in gold prices as temporary and said the fund used the weakness to increase gold-equity exposure. The AUD1.5 billion long-short strategy is run with co-manager Mark Landau and currently carries a net long position of about 60-65%.

The strategy, launched in February 2025 and listed on the Australian Securities Exchange in April, pairs long positions in gold-mining companies with short positions in gold futures to reduce direct commodity risk. Through August the fund produced a 235% net return since inception and returned 18% net to investors for January–August, despite a roughly 6% fall in the gold price over that period.

Managers raised equity exposure more aggressively when bullion fell below $4,000 an ounce, buying mining stocks they judged attractive and shorting names viewed as expensive or facing operational problems. The portfolio is concentrated in larger miners, with most positions drawn from companies with market capitalizations of at least US$5 billion.

Stock selection and corporate activity supported performance. The fund’s largest holding is Eldorado Gold. L1 is the biggest shareholder in K92 Mining, which operates the Kainantu mine in Papua New Guinea. The strategy benefited from OceanaGold’s agreed acquisition of Ausgold after L1 bought Ausgold shares at about A$0.50 each; the transaction price was A$1.36 per share.

The managers participated in an entitlement offer in August that raised A$160 million for the fund, increasing their own exposure. Lamm said the team is unlikely to reduce the net long position unless the gold price reaches their upside targets.

On the outlook, Lamm pointed to deteriorating fiscal positions in major economies, especially the United States, and continued central-bank purchases as factors that should support gold over the medium to long term. He added that near-term price moves will be sensitive to developments in the US-Iran conflict, shifts in real interest rates and incoming inflation data.

Gold peaked in January before retreating amid higher energy costs and expectations of further Federal Reserve rate increases. Since tensions escalated in late February, bullion has fallen about 20%. Lamm expects further consolidation in the gold-mining industry to create acquisition opportunities among mid-cap developers.