The revised spot price for uranium by Ux Consulting Company to $110/lb should not have come as a shock to any of us. This is not the only indictor out there and we must be aware of the wider picture.

The headline price is what makes the news but we must be careful and consider the underlying trends and associated factors before jumping to any conclusions.

Ux Consulting Company refer to excess supply and anaemic demand to support the their revised price drop of $10/lb while across the street we have TradeTech who have dropped their spot price by $3/lb to $120/lba while ago. These two organisations are the recognised experts at what they do in the uranium sector so their guidance is not to be ignored.

However when we dig a little deeper into the longer-term uranium price we can see that the price is still $95/lb and that this longer-term price has not been revised in a downward direction. To get a second line on the longer-term price we can take a look at the NYMEX Futures market for uranium. What we see here is the following:

July 2007…………………..$120/lb
December 2007……………$109/lb
January 2008………………$103/lb
June 2008………………….$106/lb
December 2008……………$111/lb

We know that this futures market is still in its infancy and as with most new financial vehicles it will take a little time to settle down. But for what it is worth we can see that 2008 has a range from $103/lb to $111/lb. Both of these figures are above the longer-term average price indicator of $95/lb and this gives us some comfort in that a support level is being formed in this area.

Another aspect of this Bull Market in uranium is the magnetic attraction it has for the short-term traders, this market is thin and on the move, ideal for a quick off the mark gunslinger. In our articles regarding the fictitious Gigantum Power Corporation we tried to roll play the situation in their boardroom prior to an auction and wrote this:

“The demand that we do not know about lurks in the shadows like an assassin awaiting his prey. The hard-nosed wheelers and dealers in New York have taken an interest and want a piece of this the hottest play in town. They know that they must edge out the like of the utilities and also other private investors and fund managers. So they raise the bar”

Prior to that auction uranium was $122/lb it has since been up to $138/lb so the entrepreneur who acquired uranium on the run up to $138/lb has seen his profits eroded and might just be sitting on a loss at this very moment. We could now have a few of these people in the same boat feverously looking to unload their miss-timed move into yellowcake.

As investors this day to day activity should be considered as white noise, an irritation, a sideshow, but it should not blind us to the fundamentals of this market; The ever-increasing demand curve, the almost daily announcements of newly planned nuclear power plants, the slow but steady conversion of the ‘green’ opposition.

Short term imbalances will come and go and we will bob up and down with them in the full knowledge that the uranium tide is coming in and many of our uranium stocks will be lifted not only much higher than they are today but much higher than they have ever been before.