Australian hedge fund manager Raphael Lamm, whose long-short gold fund has delivered a net return of more than 200% to investors since its launch last year, sees the recent decline in bullion as temporary, arguing that key forces underpinning its long-term rally remain intact. The “unsustainability of fiscal situations in key markets,” particularly US government debt of more than $40 trillion, as well as growing central-bank allocations, will support gold over the medium to long term, said Lamm, who co-manages the A$1.5 billion ($1.1 billion) L1 Gold Fund with Mark Landau.

In the near term, prices are set to be driven by developments in the US-Iran war, real interest rates and inflation data. Gold has been under pressure since hitting a record in January, as surging energy prices and Fed rate hike bets weigh on the metal. It is down about 16% since the US-Iran war erupted in late February. “While there’s been some headwinds to gold markets since the Iran war, we think they’re very temporary in nature,” Lamm said.

Lamm’s fund, which pairs long positions in gold stocks with a short position in gold futures as a hedge, has returned a net 235% through August since its launch in February last year. That compares with a gain of about 148% for Van Eck Gold Miners ETF and 55% advance in physical gold prices over the same period.

The fund is using the decline in bullion to add to its long gold equity positions. Lamm and Landau also increased their personal stakes through an entitlement offer that raised A$160 million in August. The fund’s biggest position is in Canadian miner Eldorado Gold Corp.