Should the Dow Jones to gold ratio retrace to 1:1, which it’s on a number of events in the past, the gold price could ascend 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 development of gold prices this year, combined with falling electric power prices, margins of the trade have not been better, he observed.
“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 seeing margin expansion. The gold miners haven’t had it very good. The margins they are generating are actually the fattest, the best, the complete unbelievable margins they have already had,” Lassonde told Kitco News.
Margin expansions and the stock price rally that the mining industry has seen this year should not dissuade new investors from keying in the room, Lassonde claimed.
“You haven’t skipped the boat at all, even though the gold stocks are actually up double from the bottom level. At the bottom part, six months to a season before, the stocks have been extremely inexpensive that nobody was interested. It’s exactly the same old story in the room of ours. At the bottom level of the market, there’s not enough cash, and also at the top part, there’s always way a lot of, and we are slightly off the bottom part at this point on time, and there’s a great deal to go just before we reach the top,” he stated.
The VanEck Vectors Gold Miners ETF (GDX) forty seven % year to particular date.
More exploration action is actually expected from junior miners, Lassonde claimed.
“I would claim that by following summer time, I would not be surprised if we had been to see exploration budgets up by about 25 % to 30 % as well as the year after, In my opinion the budgets will be up much more likely by 50 % to seventy five %. I do believe there is likely to be a major increase in exploration budgets with the following two years,” he said.