Uranium squeezing: a price driver or an ephemeral trend?
Will uranium be the next market to benefit from a Reddit bump? Members of the online forum helped drive GameStop shares and silver prices up earlier this year.
Will uranium be the next market to benefit from a Reddit bump?
Members of the digital collective helped drive GameStop (NYSE: GME) shares and silver prices up earlier this year, and now attention seems to be focused on the uranium space.
The GameStop saga began in January and saw members of Reddit’s WallStreetBets forum blow up their favorite stock. Shares of the company hit an all-time high of US $ 324, up more than 5,000% year-over-year, before dropping back to the current level of around US $ 160.
Shortly after the short GameStop crunch started to generate interest, another faction of Redditors set their sights on money. WallStreetSilver users began to take ownership of the metal, with their shares eventually pushing silver to an annual high of US $ 28.55 an ounce on February 1.
Silver couldn’t stay at that high point, but the attention seems to have supported a higher price point – the white metal is now holding at the US $ 25 level, which it has not kept. since 2013.
In the midst of this activity, another Reddit segment related to compression has emerged. Called UraniumSqueeze, this part of the online forum welcomes investors interested in the clean energy potential of uranium, as well as companies in the sector. Despite its name, the focus is not on squeezing uranium prices or stocks, but its development seems to have drawn more attention to the industry.
“As with a lot of the Reddit buzz we’ve seen, it can sometimes be fleeting. But it has improved the visibility of the uranium industry, ”said Rohan Reddy, research analyst at Global X ETFs.
The uranium space has long struggled with problems of public perception and its image has only started to change in the last five years.
“Unlike some of the others out there, like GameStop or the silver, uranium is a bit of a fledgling industry,” Reddy said. “So usually when you get a little more exposure in the media on these individual titles, it also generates interest in the rest of the industry.”
The increased interest has been welcomed by the market, although it is still in its infancy.
“Even though that doesn’t necessarily translate into profit in any way, because it’s not really rooted in fundamentals, it’s more just technical buying, it brought a little more liquidity to the market, this which in my opinion is a good thing ”. explained the analyst.
This sentiment was echoed by Lobo Tiggre, Founder and Editor-in-Chief of Independent Speculator.
“I think (Reddit’s attention) would have a much bigger impact on uranium, if such a surge gained traction,” Tiggre said. “Uranium is a smaller market, and the crowdsourcing effort would not be aimed at breaking down large financial institutions.”
Transform social interest into market growth
In the months since UraniumSqueeze launched on Reddit, a number of interesting developments in the uranium market have encouraged those following space.
Uranium consumption in the United States has once again become a priority after former President Donald Trump’s storage plans slowed down. Current President Joe Biden is now committed to advancing the small modular reactor industry globally through American innovation.
Apart from that, companies such as Denison Mines (TSX: DML, NYSEAMERICAN: DNN) and US-based UEC (NYSEAMERICAN: UEC) recently announced their intention to acquire physical uranium, sparking discussions around a tightening of supply and a potential rise in prices.
There has also been growth on the exploration and royalty side of the sector, a Tiggre trend linked to investor exuberance. “Whether this is rational or irrational remains to be seen,” he said.
“Specifically, I think we’ve seen some significant new institutional purchases. I don’t think the uranium bug population has suddenly doubled in recent months, ”Tiggre continued. “I think some entities with deep pockets see the writing ‘when, not if’ on the uranium on the wall, and built positions before uranium prices exploded again.”
While explorers saw a related growth in the price of stocks, these same advances did not translate into all levels for producers. However, as Tiggre explained, there are minors who took advantage of it.
“A large company located somewhat north of here has performed well over the past six months. The same goes for the biggest and cheapest producer in the world, ”he said. “But in any case, producers are supposed to make money, so it’s no surprise that some shareholders lose patience with them when they don’t.
As of the first week of May, the spot price for U3O8 was US $ 28.65 per pound, slightly below the highest level for the year. With fundamentals seemingly improving day by day, the market continues to wait for a breakout.
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Disclosure of Title: I, Georgia Williams, do not have any direct investments in any of the companies mentioned in this article.
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