If the Dow Jones to gold ratio retrace to 1:1, which it has on a number of activities in the past, the gold price could very well go up to $15,000 to $20,000 an ounce assuming the metal catches up to the Dow, based on 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 energy costs, margins of the industry have not 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 very beneficial. The margins they’re creating are actually probably the fattest, the very best, the complete unbelievable margins they’ve ever had,” Lassonde told Kitco News.
The stock and margin expansions price rally that the mining sector has seen the season should not dissuade brand new investors by keying in the room, Lassonde claimed.
“You have not skipped the boat at all, despite the fact that the gold stocks are actually up double from the bottom part. At the bottom level, six months to a season ago, the stocks have been so inexpensive that no one was curious. It is exactly the same old story in the area of ours. At the bottom part of the industry, there is never enough money, and at the top part, there is usually way too much, and we’re barely off the bottom level at this point on time, and there’s a great deal to go before we achieve the top,” he said.
The VanEck Vectors Gold Miners ETF (GDX) forty seven % season to day.
More exploration action is actually expected from junior miners, Lassonde claimed.
“I would say that by next summer time, I would not be surprised if we had been to see exploration budgets in place by between 25 % to thirty % as well as the year after, I believe the budgets will be up very likely by fifty % to seventy five %. I do believe there is likely to be a huge surge in exploration budgets with the next 2 years,” he stated.