If the Dow Jones to gold ratio retrace to 1:1, which it’s on a few activities of the past, the gold price could very well ascend 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, coupled with falling electric power costs, margins in the business have not been better, he noted.
“As the gold price goes up, that distinction [in gold price and energy prices] will go straight into the margins and you are seeing margin development. The gold miners have never had it extremely healthy. The margins they are producing are actually the fattest, the very best, the complete incredible margins they have previously had,” Lassonde told Kitco News.
Margin expansions and the stock price rally that the mining market has noticed the year should not dissuade new investors from keying in the area, Lassonde believed.
“You haven’t missed the boat at all, even though the gold stocks are up double from the bottom. At the bottom, six months to a season past, the stocks had been so low-cost that nobody was serious. It’s exactly the same old story in our area. At the bottom level of the industry, there’s not enough money, and also at the top part, there’s constantly way too much, and we are barely off of the bottom part at this stage on time, and there is a lot to go just before we reach the top,” he mentioned.
The VanEck Vectors Gold Miners ETF (GDX) 47 % season to day.
More exploration task is actually predicted from junior miners, Lassonde believed.
“I would point out that by next summer, I would not be surprised if we had been seeing exploration budgets set up by between 25 % to thirty % and the year after, I do think the budgets will be up more likely by 50 % to 75 %. I do believe there is likely to be a big increase in exploration budgets over the next two years,” he said.