D'OH!! I heard Homer Simpson is betting big on the uranium market. He buried a pile of luminous rocks in his backyard about a year ago … and he’s still waiting for the check to arrive. In the meantime, Marge couldn’t help but notice a strange breed of two-headed rabbit gamboling around the site where Homer stashed the glowing ore. Clearly, Springfield’s most famous resident has been the recipient of less than sound financial advice and probably needs to re-assess his investment strategy.
Still, Homer’s sentiment is right. Spot uranium prices have enjoyed an uninterrupted bull-run since May 2003. The reason for the increase in demand is mainly due to the over 50 new nuclear reactors that have been greenlit for Asia. The nuclear expansion is being led by China and India, but several other countries are planning to go ahead with construction plans. They include Vietnam, Indonesia and Pakistan.
But uranium has started showing signs of running out of steam. The commodity’s winning streak began faltering last month and prices have since fallen to $129 a pound, down 6.5% in three weeks. Nevertheless, prices remain well north of $100 and forecasters predict it will remain well supported around that level for the foreseeable future.
Should we be unduly worried about the recent drop in prices? Is this a warning sign of a more significant correction? Analysts don’t think so. The drop we witnessed in June is nothing more than a 'modest correction' driven by seasonal changes in demand.