When the Dow Jones to gold ratio retrace to 1:1, that it has on a number of 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, 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 sector. Because of the expansion of gold prices this year, coupled with falling energy costs, margins of the business have not been better, he observed.
“As the gold price goes up, that distinction [in gold price and energy prices] will go directly into the margins and you are noticing margin development. The gold miners haven’t had it so beneficial. The margins they are generating are actually the fattest, the best, the absolute unbelievable margins they have ever had,” Lassonde told Kitco News.
The stock and margin expansions price rally that the mining market has seen the season should not dissuade new investors from typing the room, Lassonde believed.
“You have not missed the boat at all, despite the fact that the gold stocks are up double from the bottom level. At the bottom level, six months to a year past, the stocks were so low-cost that no one was curious. It is the same old story in the space of ours. At the bottom part of the sector, there’s not more than enough money, and also at the top part, there is usually way a lot of, and we’re slightly off the bottom at this point on time, and there is a lot to go before we reach the top,” he stated.
The VanEck Vectors Gold Miners ETF (GDX) 47 % year to date.
Far more exploration activity is actually predicted from junior miners, Lassonde claimed.
“I would point out that by next summer, I wouldn’t be surprised if we were to see exploration budgets in place by about twenty five % to 30 % and the season after, I think the budgets will be up more likely by fifty % to 75 %. I do believe there’s likely to be a major surge in exploration budgets with the following 2 years,” he mentioned.