Should the Dow Jones to gold ratio retrace to 1:1, that it has on several activities of the past, the gold price could rise 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 sector. Due to the expansion of gold prices this season, fused with falling electric power costs, margins in the industry haven’t been better, he noted.
“As the gold price goes up, that difference [in gold price as well as energy prices] will go right into the margins and you’re discovering margin expansion. The gold miners haven’t ever had it so healthy. The margins they’re producing are probably the fattest, the best, the absolute unbelievable margins they have ever had,” Lassonde told Kitco News.
Margin expansions and the stock price rally that the mining industry has observed the season should not dissuade brand new investors by keying in the room, Lassonde said.
“You haven’t missed the boat at all, despite the fact that the gold stocks are up double from the bottom level. At the bottom, six months to a year past, the stocks were extremely affordable that no one person was serious. It is the same old story in the area of ours. At the bottom part of the industry, there’s never more than enough cash, and also at the upper part, there is usually way a lot of, and we’re slightly off the bottom at this moment in time, and there’s a great deal to go just before we achieve the top,” he stated.
The VanEck Vectors Gold Miners ETF (GDX) 47 % season to particular date.
More exploration task is actually predicted from junior miners, Lassonde believed.
“I would say that by following summer, I wouldn’t be surprised if we were to see exploration budgets in place by anywhere from twenty five % to 30 % and also the year after, I think the budgets will be up more likely by fifty % to seventy five %. I do believe there’s going to be a huge rise in exploration budgets over the following two years,” he said.