If the Dow Jones to gold ratio retrace to 1:1, which it has on several activities in 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, according to Pierre Lassonde, chair emeritus of Franco Nevada.
Lassonde retired from the board of Franco Nevada this year, but is still actively working in the mining market. Because of the development of gold prices this year, coupled with falling electricity prices, margins in the business haven’t been better, he noted.
“As the gold price goes up, that distinction [in gold price as well as energy prices] will go directly into the margins and you’re seeing margin development. The gold miners haven’t ever had it extremely beneficial. The margins they are generating are actually probably the fattest, the best, the complete incredible margins they have previously had,” Lassonde told Kitco News.
Margin expansions and the stock price rally that the mining industry has seen the year should not dissuade new investors by keying in the room, Lassonde believed.
“You have not skipped the boat at all, even when the gold stocks are up double from the bottom part. At the bottom, six months to a year past, the stocks have been very cheap that no one person was interested. It’s the same old story in our space. At the bottom of the industry, there is not more than enough money, and also at the upper part, there is constantly way excessively, and we are barely off the bottom part at this point in time, and there’s a lot to go before we achieve the top,” he said.
The VanEck Vectors Gold Miners ETF (GDX) 47 % season to particular date.
Far more exploration task is actually anticipated from junior miners, Lassonde said.
“I would claim that by next summer, I wouldn’t be surprised if we were to see exploration budgets set up by anywhere from twenty five % to thirty % and the year after, I believe the budgets will be up very likely by 50 % to 75 %. I do believe there’s going to be a huge rise in exploration budgets with the next 2 years,” he stated.