Uranium: Prerequisite and Good Momentum for New Uptrend?

The U.S. Government is pushing Congress to support a US$4.3 billion plan to reduce the nation’s reliance on enriched uranium imports by promoting direct purchases from domestic producers.

The legislation bid expects to see the government act as a guaranteed buyer of the U.S. domestic enriched uranium production and aims to spur development of enrichment and other steps needed to turn uranium into reactor fuel.

Investment banks have been cheering on uranium for the past few years, motivated by growing disappointment by worldwide green energy program executions and seen as a safer bet against classic fuel deficits caused by rising geopolitical tensions. There are specialist investment funds such as the Sprott Physical Uranium Trust and London-listed Yellow Cake, a nickname for uranium. Both are ‘buy and hold’ funds, acquiring metal and stockpiling it in the belief that a U-boom is coming.

Yellow Cake’s price has been a solid upward pattern over the past 12-months, rising by 32% on the London Stock Exchange, though looked at over a shorter time frame it is down, along with the broader market, by 5.5% over the past month.

The current worldwide annual consumption of uranium totals 180 million pounds while production totals 120 million pounds with the shortfall covered from stockpiles, a situation which cannot last much longer.

The problem for investors is that they’ve heard the uranium story many times before and it always seems to be the commodity which may stall all of a sudden halfway to its target.

If we look at a 5-year chart of uranium, a pattern of surge and plateau can be seen with upward breakouts that include a rise from US$20/lb to US$28/lb between mid-2017 to the end of 2018. From US$25/lb to US$33/lb in early 2020, and most recently from US$36/lb to US$49/lb. The long-term price indicator remains at US$52.00/lb. Not much of an upside, but the very fact that uranium is in everyone’s focus again, is apparently forming a favorable environment for the utility metal to start a new upward price cycle.