Gold Fund Manager Sees Pause, Not Turning Point, in Recent Price Drop

A recent gold fund manager's analysis suggests that the current pullback in gold prices may not be a long-term trend. Since the US-Iran war began in late February, gold has dropped by about 16%. However, Raphael Lamm, co-manager of the L1 Gold Fund, believes that this decline is more of a pause than a turning point.

Lamm points out that central banks' heavy buying and concerns over government finances, including the US debt exceeding $40 trillion, remain key drivers of gold demand. He notes that central banks typically think in years, not weeks, when adding gold to their reserves. This can lead to physical metal being stored in 'sticky' hands, leaving day-to-day prices vulnerable to short-term fluctuations.

Gold-mining stocks tend to be more volatile than the metal itself, as they are affected by production costs, investor risk appetite, and other factors beyond just gold prices. If official buyers continue to accumulate gold, it could lead to a decrease in the tradable pool available for short-term demand, putting a floor under prices over time.