Australian Hedge Fund Manager Says Gold Price Drop Is Short-Lived

Australian hedge fund manager Raphael Lamm says the recent fall in gold prices is only temporary and the main drivers of its long-term rally are still in place. Lamm co-manages the L1 Gold Fund with Mark Landau. The fund has delivered a net return of 235% through August since its launch in February last year. That compares with a gain of about 148% for the VanEck Gold Miners ETF and a 55% advance in physical gold prices over the same period. Gold prices have dropped about 16% since the US-Iran war started in late February. High energy prices and bets on Federal Reserve rate hikes have also put pressure on the metal since it hit a record in January. Bullion traded at $4,286.01 an ounce on Thursday evening in Sydney. Lamm points to heavy US government debt and growing central bank buying as factors that will support gold over the medium to long term. In the short term, prices will move based on the US-Iran war, real interest rates, and inflation data. The fund is using the lower prices to add to its long gold equity positions, especially in companies with a market value of at least $5 billion. Both managers also increased their personal stakes in the fund through an entitlement offer that raised A$160 million in August. The fund focuses on companies with lower valuations and near-term cash flows. Its biggest position is in Canadian miner Eldorado Gold Corp, and it is the largest shareholder of K92 Mining Inc., which runs the Kainantu Gold Mine in Papua New Guinea. Lamm also expects more deals in the mining sector to boost returns, noting OceanaGold Corp.'s recent purchase of Australian miner Ausgold Ltd.