Should the Dow Jones to gold ratio retrace to 1:1, that it has on several events in the past, the gold price might climb 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 year, but is still actively active in the mining market. Due to the expansion of gold prices this season, combined with falling electric power prices, margins of the industry have never been better, he observed.
“As the gold price goes up, that disparity [in gold price as well as energy prices] will go directly into the margins and you are seeing margin expansion. The gold miners haven’t had it so good. The margins they are producing are the fattest, the very best, the absolute unbelievable margins they have ever had,” Lassonde told Kitco News.
Margin expansions and the stock price rally that the mining sector has noticed the year shouldn’t dissuade new investors by typing the space, Lassonde believed.
“You haven’t missed the boat at all, despite the fact that the gold stocks are up double from the bottom. At the bottom part, six months to a season before, the stocks were very low-cost that no one was curious. It’s the same old story in our area. At the bottom part of the market, there is never sufficient cash, and at the top, there is always way a lot of, and we are barely off the bottom level at this moment on time, and there’s a great deal to go just before we achieve the top,” he said.
The VanEck Vectors Gold Miners ETF (GDX) 47 % year to day.
Far more exploration activity is predicted from junior miners, Lassonde believed.
“I would claim that by following summer time, I wouldn’t be shocked if we were seeing exploration budgets up by anywhere from twenty five % to thirty % as well as the season after, I do think the budgets will be up much more likely by 50 % to seventy five %. I do believe there’s going to be a huge rise in exploration budgets with the next 2 years,” he stated.