When the Dow Jones to gold ratio retrace to 1:1, which it has on several activities of the past, the gold price could very well ascend to $15,000 to $20,000 an ounce assuming the metal catches up to the Dow, based on Pierre Lassonde, chair emeritus of Franco-Nevada.
Lassonde retired from the board of Franco Nevada this season, but is still actively active in the mining industry. Because of the expansion of gold prices this season, coupled with falling electric power costs, margins of the business have never been better, he seen.
“As the gold price goes up, that distinction [in gold price and energy prices] will go straight into the margins and you are seeing margin expansion. The gold miners haven’t had it so good. The margins they are generating are the fattest, the best, the complete incredible margins they have ever had,” Lassonde told Kitco News.
The stock and margin expansions price rally that the mining market has noticed this season shouldn’t dissuade brand new investors from keying in the space, Lassonde said.
“You haven’t skipped the boat at all, despite the fact that the gold stocks are up double from the bottom level. At the bottom, six months to a year before, the stocks have been very affordable that nobody was curious. It is exactly the same old story in the space of ours. At the bottom level of the industry, there is not enough money, and at the upper part, there’s often way excessively, and we’re slightly off of the bottom at this moment on time, and there is a lot to go just before we get to the top,” he mentioned.
The VanEck Vectors Gold Miners ETF (GDX) forty seven % season to date.
More exploration activity is expected from junior miners, Lassonde said.
“I would point out that by next summer time, I wouldn’t be surprised if we were seeing exploration budgets set up by anywhere from 25 % to 30 % and also the year after, I do believe the budgets will be up more likely by fifty % to 75 %. I do believe there is likely to be a huge increase in exploration budgets over the following 2 years,” he stated.