The uranium market performed admirably in January due to increased demand for nuclear energy amid global energy shortages and soaring energy prices. Sprott recently released a report stating that the uranium market performed well in January, as the spot price of U308 uranium increased to $50.75 per pound from $48.31 last month and uranium mining equities went up by 14.65%.
Spot prices for U308 uranium have gone up by about 104.23% since 2019 and 14.74% in 2022, signifying the market’s continued upward trajectory over the last few years. Uranium mining equities, on the other hand, bounced back last month after experiencing an 11.42% decline over the course of last year.
Even though the demand for uranium and nuclear energy soared in 2022 and was bolstered by support from global governments, prices for uranium mining equities lagged due to the systemic risk presented to overall markets. But as investor sentiment shifted in January and headwinds for equity markets began to diminish, uranium mining equities experienced a significant surge in value. Overall, the jump in uranium mining equities last month represents a huge gain of 213.63% from Dec. 31, 2019, to Jan. 31, 2023.
The Sprott report posited that reduced fears of an impending recession in the United States and reduced inflation contributed to the shift in investor sentiment and propped up uranium markets. Expectations of reduced inflation through action by the United States Federal Reserve have also produced a risk-on sentiment that pushed more investors to uranium markets and increased prices in January.
On the other hand, market headwinds that increased scarcity in 2022 reversed course in January, most notable being China’s reversal of its zero-tolerance COVID policy and warm weather mitigating the energy crisis in Europe. The report notes that the reversal of these headwinds allowed uranium mining equities to soar in January.
Global efforts to transition from dirty fuels such as coal and oil to more sustainable options have also resulted in renewed interest in uranium and nuclear energy. Several countries that had initially shut down their nuclear energy power plants are extending the lives of old nuclear power plants while nations such as China and India are planning to build several new nuclear plants to supplement their energy mix.
With experts predicting that inflation is here to stay for a while, uranium could act as a suitable inflation hedge and help to protect investors’ portfolios until the Fed gets inflation under control.
When uranium starts being seen as a hedge against inflation, stocks of extractors such as Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) could be in the spotlight as investors look to shore up their positions.
NOTE TO INVESTORS: The latest news and updates relating to Energy Fuels Inc. (NYSE American: UUUU) (TSX: EFR) are available in the company’s newsroom at http://ibn.fm/UUUU
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