Livewire | Less than halfway through the gold story

This article was first published in Rules of Investing | Livewire Markets on 18 March, 2026.

L1 Capital is no stranger to commodities and precious metals. As Raphael Lamm, Co-Founder and Co-Chief Investment Officer, tells The Rules of Investing, these exposures have been part of the opportunity set since the launch of the L1 Capital Long Short Fund in 2014.

What began as stock-specific positioning, however, has evolved into something far more deliberate. In March 2025, L1 launched a dedicated gold strategy that has since delivered strong returns. Now, that strategy is set to list as a Listed Investment Company (LIC) – the L1 Gold Fund Limited (ASX:LGF, subject to ASX approval), giving more investors access to the opportunity.

The strategy will be managed by Lamm, and fellow Co-Founder and Co-Chief Investment Officer, Mark Landau. Lamm and Landau will also be significant investors in the LIC alongside clients. As with all L1 strategies, the firm maintains a strict no personal share trading policy, with the vast majority of staff and principals’ wealth invested directly in L1 funds.

The question is not just ‘why gold?’, but ‘why now?’ For Lamm, the answer starts with what the market is missing. He points to “some astounding forecast free cash flow yields over the next few years”, arguing that the real opportunity sits within the equities, not the commodity itself.

That opportunity is not dependent on a continued surge in the gold price. In fact, Lamm is explicit that “our whole thesis is based on gold going sideways from here”, highlighting a disconnect between current spot prices and the far lower assumptions embedded in equity valuations.

Overlay that with what he describes as structural forces underpinning the gold price, not cyclical ones, and the case becomes clearer.

In this episode of The Rules of Investing, Lamm explains why the real opportunity is not in bullion but in mispriced gold equities, and why this cycle may have much further to run.

Three ways to make money in gold

For Lamm, the appeal of commodities, and gold in particular, starts with a simple but powerful framework.

Even when only one or two are working, however, the opportunity set can still be compelling. It is this layered approach that has underpinned L1’s long-standing interest in the space.

Gold’s resurgence is structural, not cyclical

While gold has always responded to uncertainty, Lamm believes the current backdrop is fundamentally different.

The key driver is the scale of global debt. Major economies are running persistent deficits despite relatively strong growth, pointing to a structural imbalance rather than a temporary one.

At the same time, geopolitical tensions are rising, underpinned by the shifting balance of power between the United States and China. These are not short-term issues. They are long-duration forces that are unlikely to reverse quickly.

There is also a growing loss of confidence in the US dollar system, particularly following recent geopolitical events. That has prompted central banks, especially in emerging markets, to increase their allocation to gold.

Taken together, these forces create a durable foundation for the gold price.

It’s not about gold, it’s about cash flow

Despite the macro backdrop, Lamm is clear that L1 is not investing in gold as a commodity.

The focus is on companies, and more specifically, on their ability to generate free cash flow.

Across parts of the gold sector, particularly in mid-cap producers and developers, L1 is seeing strong forecast free cash flow yields. Yet valuations remain anchored to low long-term gold price assumptions. That disconnect creates a compelling opportunity.

Even if the gold price does not move from here, the gap between realised prices and embedded assumptions should drive earnings upgrades and re-ratings.

Where L1 is finding opportunity

L1’s focus is firmly on mid-cap producers. These businesses typically have multiple assets, proven management teams, and existing cash flow, while still offering meaningful growth.

Importantly, they are less efficiently priced than large-cap peers, where index flows and broader investor attention tend to keep valuations closer to fair value. Within this segment, L1 is targeting companies with clear catalysts over the next six to 24 months.

The firm also allocates selectively to developers.

Across both buckets, the focus remains consistent. Identify companies where the market is underestimating future cash flow and where there is a clear path to unlocking that value.

Stock ideas

Among L1’s current holdings, several names stand out as examples of this thesis in action.

One is K92 Mining (TSE: KNT), a Canadian-listed producer with operations in Papua New Guinea. Lamm highlights its consistency, noting the company has repeatedly met or exceeded expectations, driven by strong grade performance and operational execution.

Crucially, much of the heavy capital expenditure has already been completed. That sets the business up for a period of rising production and accelerating free cash flow, with valuation metrics that remain undemanding relative to peers.

Another example is Challenger Gold (ASX: CEL), a more recent addition to the portfolio. The company is transitioning into production, with early cash flow expected to fund further development.

In both cases, the common thread is clear. Proven assets, visible growth, and a disconnect between current valuation and future cash generation.

Why the market hasn’t caught up

As Lamm tells it, gold equities have a history of disappointing investors.

For years, cost inflation, missed guidance, and poor capital discipline meant that rising gold prices did not translate into shareholder returns. As a result, many investors stepped away from the sector. That is now changing.

Margins have expanded significantly, and companies are beginning to deliver consistent free cash flow. But investor confidence takes time to rebuild, and capital has yet to fully return.

At the same time, global portfolios remain heavily skewed toward US large caps, particularly in growth and technology. For Lamm, that positioning creates a lag, but also an opportunity.

Hedging the commodity, backing the companies

A key feature of L1’s approach is its use of hedging. While the team has high conviction in the companies they own, they are less certain about short-term movements in the gold price.

As a result, they hedge part of their exposure through gold futures.

This allows them to reduce downside risk while maintaining exposure to the equity-specific opportunity.

The bigger picture

Stepping back, Lamm’s message is clear. The gold story is no longer just about crisis or momentum. It is about structural change, improving fundamentals, and a sector that is still under-owned. Importantly, he believes the opportunity is still in its early stages.

With strong cash flow generation, supportive macro drivers, and valuations that have yet to fully adjust, the case for gold equities, rather than gold itself, is becoming increasingly difficult to ignore.

Listen to the episode here.