Why uranium stocks exploded this week


What happened

Stocks of uranium stocks were on fire this week as spot uranium prices continued to rise steadily. According to data from Markets Insider, the spot price of uranium has risen 65.5% so far this year and has risen from $ 42.40 per pound to close last week at $ 49.65 at the time. where I write. It suddenly became a commodity in the energy industry.

Uranium royalty (NASDAQ: UROY) led the way by climbing 36.6% between the close of markets last Friday and the close of the market Thursday night. Ur-Energy (NYSEMKT: URG) jumped 9% over the same period and Energy fuels (NYSEMKT: UUUU) was up 6.9%. All three stocks posted a maximum intra-week gain of 52%, 17.5% and 17.8%, but gave up some of that value at the end of the week.

Image source: Getty Images.

So what

The Sprott Physical Uranium Trust (OTC: SRUU.F) obtained approval to expand its share program into the market to issue up to $ 1 billion in additional units. Since the trust is buying physical uranium, it will likely be a big buyer over the next few months, which traders are betting that will push the spot price even higher.

The trust adds a big buyer in the uranium market, which helps uranium stocks, but the party might not last long. If companies increase supply to match the increase in demand, prices will likely fall over time.

We’re also seeing an increase in uranium trading activity with hedge funds and on the advice of Reddit. Cameco (NYSE: CCJ) was a high profile stock discussed on WallStreetBets on Monday and uranium on the whole is getting more attention than the commodity usually gets. Like it or not, Reddit can drive up commodities or short-term stocks and that’s one of the reasons uranium stocks have risen this week.

Uranium Royalty likely dominated the market this week as it announced on Wednesday that it had entered into contracts that would increase its holdings of uranium to 648,068 pounds at an average cost of $ 33.10 per pound. With rising prices, there could be a windfall for the company if uranium prices hold.

Now what

Uranium stocks are moving mainly because the underlying uranium product is up this week. And there’s been a bull market in uranium over the last few months, so that’s the momentum that started some time ago.

What we don’t know is where uranium prices will go in the long run. Higher prices could mean more production from miners and this would rebalance supply and demand. If prices fall next week or month because additional demand from some buyers has been met by additional supply, uranium inventories could fall.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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