If the Dow Jones to gold ratio retrace to 1:1, which it’s on several events in the past, the gold price could climb 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 working in the mining market. Because of the expansion of gold prices this year, fused with falling electric power costs, margins of the industry have not been better, he seen.
“As the gold price goes up, that difference [in gold price as well as energy prices] will go straight into the margins and you are discovering margin expansion. The gold miners haven’t had it really good. The margins they are producing are the fattest, the best, the absolute incredible margins they have ever had,” Lassonde told Kitco News.
Margin expansions and the stock price rally that the mining market has observed this season shouldn’t dissuade brand new investors by entering the space, Lassonde said.
“You haven’t missed the boat at all, despite the fact that the gold stocks are actually up double from the bottom part. At the bottom, 6 months to a year past, the stocks had been very cheap that no one person was serious. It’s exactly the same old story in our area. At the bottom of the sector, there is not more than enough cash, and at the top part, there’s often way too much, and we’re barely off of the bottom at this point on time, and there’s a lot to go before we get to the top,” he stated.
The VanEck Vectors Gold Miners ETF (GDX) 47 % year to date.
More exploration task is actually predicted from junior miners, Lassonde said.
“I would say that by next summer time, I would not be surprised if we were seeing exploration budgets up by about twenty five % to thirty % and also the year after, I think the budgets will be up more likely by fifty % to seventy five %. I do believe there’s likely to be a huge surge in exploration budgets with the next two years,” he stated.