When the Dow Jones to gold ratio retrace to 1:1, which it has on a number of 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 year, but is still actively active in the mining market. Because of the expansion of gold prices this year, combined with falling electricity costs, margins of the business have not been better, he seen.
“As the gold price goes up, that distinction [in gold price as well as energy prices] will go straight into the margins and you are seeing margin development. The gold miners haven’t ever had it extremely healthy. The margins they are creating are actually the fattest, the best, the complete incredible margins they’ve ever had,” Lassonde told Kitco News.
The stock and margin expansions price rally that the mining market has seen the season should not dissuade new investors from entering the area, Lassonde believed.
“You haven’t missed the boat at all, even when the gold stocks are actually up double from the bottom. At the bottom, six months to a year before, the stocks were so low-cost that no one person was serious. It is exactly the same old story in the space of ours. At the bottom of the sector, there is not more than enough money, and at the upper part, there is usually way a lot of, and we’re slightly off of the bottom at this moment in time, and there is a great deal to go before we reach the top,” he stated.
The VanEck Vectors Gold Miners ETF (GDX) 47 % season to date.
More exploration activity is actually predicted from junior miners, Lassonde said.
“I would point out that by following summer, I would not be surprised if we had been seeing exploration budgets in place by between twenty five % to 30 % and also the year after, In my opinion the budgets will be up very likely by fifty % to 75 %. I do believe there’s going to be a huge surge in exploration budgets over the following 2 years,” he stated.