When the Dow Jones to gold ratio retrace to 1:1, which it’s on several activities of the past, the gold price could very well go up 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 year, but is still actively active in the mining market. Because of the expansion of gold prices this year, coupled with falling electricity costs, margins of the industry haven’t been better, he seen.
“As the gold price goes up, that disparity [in gold price as well as energy prices] will go straight into the margins and you’re seeing margin development. The gold miners have never had it really beneficial. The margins they are producing are actually probably the fattest, the very best, the absolute incredible margins they have ever had,” Lassonde told Kitco News.
The stock and margin expansions price rally that the mining sector has seen the season should not dissuade brand new investors from keying in the room, Lassonde said.
“You haven’t missed the boat at all, even when the gold stocks are actually up double from the bottom level. At the bottom part, six months to a season past, the stocks have been very low-cost that nobody was interested. It’s the same old story in our area. At the bottom of the industry, there is not more than enough money, and also at the top, there is always way excessively, and we are slightly off of the bottom level at this stage on time, and there’s a lot to go before we achieve the top,” he stated.
The VanEck Vectors Gold Miners ETF (GDX) forty seven % year to date.
Far more exploration activity is actually expected from junior miners, Lassonde claimed.
“I would say that by following summer, I wouldn’t be surprised if we had been to see exploration budgets set up by about twenty five % to thirty % as well as the season after, In my opinion the budgets will be up very likely by 50 % to 75 %. I do believe there’s likely to be a big surge in exploration budgets over the following two years,” he stated.