Should the Dow Jones to gold ratio retrace to 1:1, that it’s on a few occasions of the past, the gold price could very well rise 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 energy costs, margins of the trade have never been better, he seen.
“As the gold price goes up, that disparity [in gold price and energy prices] will go directly into the margins and you’re noticing margin development. The gold miners have never had it very beneficial. The margins they are producing are actually probably the fattest, the best, the complete unbelievable margins they’ve ever had,” Lassonde told Kitco News.
Margin expansions and the stock price rally that the mining sector has noticed the year should not dissuade new investors from entering the area, Lassonde believed.
“You have not missed the boat at all, even though the gold stocks are actually up double from the bottom part. At the bottom part, six months to a year past, the stocks have been so low-cost that no one person was curious. It’s the same old story in the room of ours. At the bottom part of the sector, there is not sufficient cash, and at the upper part, there is often way a lot of, and we are barely off of the bottom level at this point in time, and there is a great deal to go just before we achieve the top,” he stated.
The VanEck Vectors Gold Miners ETF (GDX) forty seven % season to particular date.
More exploration activity is actually predicted from junior miners, Lassonde claimed.
“I would say that by next summer time, I would not be surprised if we were seeing exploration budgets set up by about twenty five % to 30 % and the year after, I do believe the budgets will be up much more likely by 50 % to seventy five %. I do believe there is likely to be a huge rise in exploration budgets with the next two years,” he said.