Should the Dow Jones to gold ratio retrace to 1:1, which it’s on a few events in the past, the gold price might climb to $15,000 to $20,000 an ounce assuming the metal catches up to the Dow, as reported by 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, combined with falling electricity prices, margins of the business have never been better, he observed.
“As the gold price goes up, that distinction [in gold price and energy prices] will go directly into the margins and you’re noticing margin expansion. The gold miners have never had it extremely good. The margins they are creating are the fattest, the very best, the absolute incredible margins they’ve already had,” Lassonde told Kitco News.
Margin expansions and the stock price rally that the mining sector has observed this season shouldn’t dissuade new investors by typing the space, Lassonde believed.
“You haven’t skipped the boat at all, even when the gold stocks are actually up double from the bottom part. At the bottom, 6 months to a year ago, the stocks have been so inexpensive that no one was interested. It’s the same old story in our area. At the bottom part of the market, there is never sufficient cash, and also at the top, there is constantly way excessively, and we’re slightly off the bottom at this stage on time, and there is a great deal to go before we get to the top,” he said.
The VanEck Vectors Gold Miners ETF (GDX) 47 % season to particular date.
Far more exploration activity is expected from junior miners, Lassonde claimed.
“I would claim that by following summer, I wouldn’t be surprised if we were to see exploration budgets in place by anywhere from twenty five % to 30 % and the season after, I do think the budgets will be up very likely by fifty % to seventy five %. I do believe there is going to be a huge rise in exploration budgets with the next two years,” he stated.