Monday, November 25, 2013

Uranium - something big in the making ?

Gold bugs are still waiting for "their" time. Although fundamentals are strongly pro gold bugs the prices of the metal are very disappointing. Simply, for the time being, Mr Market does not care about fundamentals.

The same thing has been observed in the uranium market. For many years, the uranium bugs have been claiming that the only direction for uranium prices is "UP".

To name just a few arguments:
  • DEMAND - despite of the Fukushima event the world is condemned to uranium as an energy source - "green" energy is  just a gadget and is not able to provide the world with enough energy, therefore many countries, especially China, are still developing their nuclear energy projects;
  • SUPPLY - at the end of 2013 the so called "megatons for megawatts" program is scheduled to expire - this is one of the main uranium bugs' arguments.

Unfortunately for the uranium bugs Mr Market just ignored these thoughtful arguments and headed for the South.
But today it seems the situation is ripe for a change. Let us look at the chart:

U.TO is a chart of Uranium Participation Corp. - sort of a fund investing in uranium oxide (U3O8)which is a fuel for the nuclear plants. As you can see, in short and long term, the price of U3O8 seems to be bottoming. What is more, the relative strength of U3O8 against S&P 500 is growing.
I do not claim we see the trend change (a little bit too early for that) but there is something to keep our eye on.

No comments:

Post a Comment