Uranium Spot Price May Be In “The Buy Zone” - Written by guest contributor Jennifer Gorton from Forex Traders

The rise of global warming concerns over the last decade has brought with it a desire for alternative energy sources, and of the alternative options available, nuclear energy has garnered much attention.  At the end of the Cold War, nuclear energy became a forgotten market for many years until the explosion of energy consumption around the world and the threat of global warming combined to create an incredible demand for alternative energy sources.  The relatively clean-burning properties of nuclear power have made uranium a very interesting commodity.

Until the last few years, it was difficult for the average investor to purchase uranium.  However, that began to change in 2007 as the New York Mercantile Exchange (NYMEX) introduced its first-ever futures contract on uranium.  Since there is not an incredible amount of daily volume in the contract, it is still considered a relatively illiquid market, but it is apparent, nonetheless, that opportunities to invest in uranium are becoming more available to the average investor.

One of the greatest places to invest in uranium is in Australia.  In fact, Australia has the world’s largest uranium reserves, with 23%.  In order to grasp how large that number is in relation to the rest of the world, the second largest uranium reserve is in Kazakhstan at 15% and the third largest is in Russia with 10%.  Australia is sitting on nearly a quarter of all uranium reserves in the entire world!

The Uranium spot price has fallen significantly this year due to lower demand and a struggling global recovery.  The 2008 Global Credit Crisis delivered a major blow to uranium prices as they plummeted from the $140/pound price level down to $40/pound.  As the global economy began to show signs of recovery in 2009, commodity prices, including uranium, also found support and began to rise.  However, concerns that the recovery is slowing have hit uranium prices very hard.  In fact, from October 2009 to June of 2010, uranium prices fell sharply by almost 20%.

Whenever commodity markets get hit as uranium has, smart investors are always asking when is it time to buy?  Many investors apparently think that uranium prices are a bargain at this price as prices have began to rise in July.  The growth outlook for uranium over the long-term is very bullish.  This is due primarily to the fact that emerging economies are going to put incredible demands on energy.  As the standard of living dramatically increases throughout the world during the next 20 years, emerging markets will have an strong demand for computers, televisions, air-conditioners, etc, and all of these appliances will lead to a drastic increase in demand for energy.  Uranium is seen as a very clean-burning alternative energy source that can meet much of this demand.

If an investor is convinced that uranium prices have entered the buy zone, then he or she can take advantage of these relatively low uranium prices in several ways.

  1. The Ranger mine is Australia’s largest mine, representing approximately 53% of Australia’s total uranium production.  It is traded on the ASX as ERA.
  2. The Olympic Dam mine represents approximately 39% of Australia’s total uranium production, and it is owned by an Australian company, which is listed as BHP on the ASX.
  3. Australia’s third mine, Beverly, is privately owned by a company named Heathgate Resources.
  4. Contact a Forex brokerage house to see how the Aussie Dollar may be impacted by an increase in uranium prices and exports.

This three mine policy has been in operation in Australia for over 25 years, but it has recently been overturned by the Australian Government.  Investors may find great opportunities by following this development in Australia and investing in new mining operations that seek to take advantage of this new opportunity.

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