If the Dow Jones to gold ratio retrace to 1:1, that it has on a few activities in the past, the gold price could rise to $15,000 to $20,000 an ounce assuming the metal catches up to the Dow, according to Pierre Lassonde, chair emeritus of Franco Nevada.
Lassonde retired from the board of Franco Nevada this season, but is still actively involved in the mining industry. Because of the expansion of gold prices this year, combined with falling electricity prices, margins in the trade haven’t been better, he noted.
“As the gold price goes up, that disparity [in gold price as well as energy prices] will go right into the margins and you’re noticing margin development. The gold miners have never had it very beneficial. The margins they’re creating are actually probably the fattest, the best, the complete unbelievable margins they have ever had,” Lassonde told Kitco News.
Margin expansions and the stock price rally that the mining sector has noticed the year shouldn’t dissuade brand new investors by keying in the room, Lassonde claimed.
“You haven’t missed the boat at all, even though the gold stocks are up double from the bottom. At the bottom part, 6 months to a season ago, the stocks were extremely cheap that no one person was serious. It’s the same old story in the room of ours. At the bottom of the sector, there is not more than enough cash, and at the top part, there’s always way too much, and we are slightly off of the bottom part at this stage on time, and there’s a great deal to go just before we get to the top,” he stated.
The VanEck Vectors Gold Miners ETF (GDX) 47 % season to day.
More exploration task is actually anticipated from junior miners, Lassonde claimed.
“I would say that by next summer, I wouldn’t be surprised if we had been seeing exploration budgets up by about 25 % to 30 % and the season after, I believe the budgets will be up much more likely by 50 % to seventy five %. I do believe there’s likely to be a huge surge in exploration budgets over the following two years,” he said.