As commodities continue to soar, gold is starting to show its golden halos, as believers in the metal fan out to see what else is out there.
While it may not act as “government insurance” in the same way, gold fans are drawn to uranium for similar reasons.
The latest Casey Research letter explains:
As gold pushes US$1,170 and potentially even higher over the next few months, many investors have turned their attention towards the metal. At the energy department, however, we are more focused on the other yellow metal, the one that has been forgotten by the mainstream media and languishing since its bull market of 2007/2008. Currently, companies looking for this metal are still trading at lows and the sector has never really recovered since the drop in late 2008.
I’m talking about uranium – the metal used to power nuclear reactors across the world. From the period of 2005 to mid-2007, the price of uranium went from US$20 to a high of almost US$140 per pound, a shocking 700% increase.
What are some factors potentially pushing it higher, if not the weak USD?
So, why do we like uranium? Several reasons:
- The world must go nuclear – Nuclear has been an unpopular option for the world ever since the Three Mile Island incident in 1979 and Chernobyl in 1986. However, as the world looks to cut back carbon emissions, even former opponents of nuclear are beginning to embrace it as a lesser evil. Consider the words from the co-founder of Greenpeace, Patrick Moore: “Nuclear energy is a key technology for the future and [there] should be a resurgence of this technology happening now.”
- The ending of the HEU Agreement between the U.S. and Russia in 2013 – The HEU Agreement between the U.S. and Russia, also dubbed the Megatons-to-Megawatts program, converted Russian nuclear warheads to useable fuel for American nuclear reactors. This has supplied a large percentage of the American uranium needs for the past decade. The program is ending in 2013, and the uranium to replace this source will need to come from somewhere else.
- The China factor – China currently generates about 3% of its energy from nuclear. If it reaches the regional average of 25%, it will need 8 times more reactors than it has now, putting further pressure on global uranium stocks.
Business Insider Emails & Alerts
Site highlights each day to your inbox.