Wednesday, August 22, 2007 at 09:33AM
The spot price for the world’s future energy material, uranium, has fallen to around $90/lb according to the Ux Consulting price indicator. Over the road we have $105/lb from TradeTech and a taking a quick look at the NYMEX Futures market we have December 2007 at $74/lb and December 2008 at $85/lb.
The pendulum first went one way with a swing from around $7/lb to a high of about $138/lb and now with the momentum all spent it is falling back. Will it come to rest at its median price; no, momentum will take it past that price as it swings into the too cheap zone.
As we have said before all eyes are on the auction results, which have just been held. This is microanalysis at its worst in our humble opinion, when one auction determines your investment strategy. The number to watch is the Long-term price indicator; think of it as moving average as applied to a stock. This figure we understand has not changed from $95/lb. Remember that summer is traditionally slow and this is a very thin market where the oscillations can and will be wild.
The spot price may well swing lower in the short term scaring investors out of this sector. And when it swings back again those same investors will be busting a gut to tell you how they once owned Toddler Uranium Corporation but unluckily they sold out for half the price it is now. Don’t be one of those storytellers.
Focus on the long term supply and demand fundamentals of the situation. The future is clear, it is Nuclear. Almost every day there are reports in the media about the latest country to embrace nuclear power. The demand for electricity is on the up and up, a pendulum that won’t swing back unless you are prepared to make enormous personal sacrifices.