Gold has dropped roughly 16% since late February, battered by a U.S.-Iran conflict, rising rate-hike expectations, and a stronger dollar. One of the best-performing gold funds in the world thinks the damage is temporary.

Raphael Lamm, co-manager of the A$1.5 billion L1 Gold Fund, argues that the structural forces behind gold’s long-term rally remain intact and that his fund used the pullback to add exposure aggressively below $4,000 an ounce. With a 235% net return since launch in February 2025, the fund’s track record gives the call some weight.

Bullion was trading at $4,286.01 per ounce Thursday evening in Sydney, well off the record it set in January. The selloff has been sharp enough to test conviction across the metals complex. But as Bloomberg reported via Mining.com, Lamm is not trimming. He is leaning in.

The Case for Buying the Dip

Lamm’s thesis rests on two pillars: sovereign fiscal deterioration and central-bank gold accumulation. He pointed specifically to U.S. government debt exceeding $40 trillion and described the fiscal situations in key markets as unsustainable. Growing central-bank gold allocations, in his view, represent a structural bid that will persist regardless of short-term rate noise.

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Near-term headwinds are real, and Lamm acknowledged them. He cited the U.S.-Iran war, real interest rates, and incoming inflation data as the factors pressing on gold since late February. But he drew a sharp line between those pressures and the longer-term demand picture.

“While there’s been some headwinds to gold markets and the gold price since the Iran war, we think they’re very temporary in nature. Most of the key drivers of demand for gold are going to remain intact or even strengthen over the medium term.”

That distinction matters for investors trying to decide whether this pullback is a regime change or a correction within a larger bull market. The answer depends on whether you think rate hikes and geopolitical uncertainty can permanently offset the fiscal and monetary forces that pushed gold above $5,000 in the first place. Lamm is betting they cannot.

As we explored in our recent analysis of whether rate hikes can push bullion back to its highs, the tension between tightening expectations and structural demand has become the defining question for gold allocators in 2026.

How the Fund Actually Works

The L1 Gold Fund is not a simple long-gold vehicle. It runs a long-short strategy, pairing long positions in gold-related equities with a short position in gold futures as a hedge. It also shorts gold stocks it views as overpriced or operationally challenged. That structure explains how the fund posted an 18% net return through August even as gold prices fell 6% over the same period.

The fund’s net long exposure currently sits in the “low- to mid-60%” range, according to Lamm. He described adding long positions “relatively aggressively” when gold fell below $4,000.

“We started to increase our long positions relatively aggressively when the gold price got below $4,000, and now we’re keeping it where it is, which is in the low- to mid-60% net long.”

Most of the fund’s holdings are in companies with market capitalizations of at least $5 billion. Its biggest position is Eldorado Gold Corp., the Canadian miner. It is also the largest shareholder of K92 Mining Inc., which operates the Kainantu Gold Mine in Papua New Guinea.

The fund’s focus on mid-cap gold equities is deliberate. Lamm described the space as having “over a trillion dollars of addressable market cap” and argued there is a strong angle for a specialist group to concentrate there. The implication: generalist funds underweight the sector, leaving pricing inefficiencies for dedicated operators to exploit.

Performance in Context

A 235% net return since February 2025 is an extraordinary number. Over the same period, the VanEck Gold Miners ETF gained approximately 148%, and physical gold advanced roughly 55%. The fund has outperformed both benchmarks by a wide margin, though the comparison is imperfect: a hedged long-short fund carries a different risk profile than a passive miners ETF or a bar of bullion.

The Melbourne-based L1 Group, the fund’s parent, manages approximately $14 billion across its platform. Its client base includes large superannuation funds, pension funds, family offices, and high-net-worth and retail investors. Lamm and co-manager Mark Landau both increased their personal stakes in the fund through an August entitlement offer that raised A$160 million, or roughly $114 million.

When fund managers put their own money in during a drawdown, it signals something. It does not guarantee the trade works. But it narrows the gap between what they say publicly and what they believe privately. That alignment matters in a market where hedge fund positioning has become a signal in itself.

The M&A Angle

Lamm flagged mergers and acquisitions as a near-term return driver. The fund held shares in Ausgold Ltd., an Australian miner, purchased at approximately A$0.50 per share. OceanaGold Corp. recently agreed to acquire Ausgold at A$1.36 a share, a transaction set to deliver a sizable gain for the fund.

“We’re really excited about some of the returns that are gonna come through M&A. We think a lot of our developers are gonna be extremely attractive targets for the mid-cap and the large-cap players.”

This is a theme worth watching across the gold-mining complex. When bullion prices are elevated, even after a 16% correction, the economics of acquiring development-stage projects improve for larger producers. Cash flows at $4,286 gold remain strong enough to finance acquisitions that would have been marginal at $2,000. The bid for smaller developers could accelerate if gold stabilizes or recovers.

What the Skeptic Should Ask

Lamm’s track record earns him a hearing. But the risks embedded in his thesis deserve honest scrutiny.

First, the rate environment. Bets on Federal Reserve rate hikes have been a meaningful weight on gold prices. If the Fed follows through, real yields could rise further, increasing the opportunity cost of holding a non-yielding asset. As we noted in our coverage of hawkish Fed talk lifting the dollar and rate-hike odds, gold has shown clear sensitivity to tightening expectations in recent months.

Second, the geopolitical overlay. The U.S.-Iran conflict has been a dual-edged factor. War typically supports safe-haven demand, yet gold has fallen since the conflict erupted in late February. That counterintuitive move suggests other forces, particularly dollar strength and rate repricing, have been dominant. Whether those forces fade depends on developments that no fund manager can predict with confidence.

Third, the fund’s structure itself. A long-short gold fund with 60%-plus net long exposure is still heavily directional. If gold falls another 10% from here, the short book may cushion losses, but it will not eliminate them. The 235% return reflects a period when gold ran from roughly $2,700 to above $5,000 before pulling back. Performance in a sustained downturn would look different.

The Bigger Picture for Gold Allocators

The debate Lamm is engaging is the right one. It is not about whether gold is a good asset. It is about whether the current correction represents a cyclical pause within a structural bull market or the beginning of something more damaging.

The fiscal argument is hard to dismiss. Sovereign debt levels in the United States and elsewhere have reached a scale where the political incentive to inflate, repress rates, or engineer some combination of both is enormous. Central banks adding gold to reserves is not a speculative bet; it is a revealed preference about the future of the monetary system. Institutional voices like Fidelity’s Jurrien Timmer have made the case that gold’s valuation is supported by liquidity dynamics alone.

But fiscal stress and central-bank buying are slow-burning forces. They set the direction over years, not weeks. In the near term, rate expectations, dollar moves, and the trajectory of the U.S.-Iran conflict will dominate price action. Lamm appears to be positioning for the longer arc while accepting short-term volatility.

For investors with a capital-preservation orientation, the key question is not whether Lamm is right about the next quarter. It is whether the structural case for gold remains intact despite a 16% correction. Consider what would have to change for that case to break:

  • Sovereign debt trajectories would need to reverse, not just stabilize
  • Central banks would need to stop accumulating gold
  • Real yields would need to rise substantially and stay elevated without triggering a credit event
  • The dollar would need to maintain strength without the fiscal backing to support it long-term

None of those conditions looks likely based on the information available. That does not make gold immune to further selling. It means the structural floor under the metal remains well-supported even as the surface gets choppy.

Lamm and his team have earned their returns by being selective, hedged, and willing to buy when others hesitate. Whether the next 18 months match the last 18 is unknowable. But when a fund with a 235% track record tells you the selloff is temporary, the burden of proof shifts, at least partly, to the bears.

Markets have a way of testing everyone’s conviction. The question is whether you are positioned for the correction or for what comes after it.