(Kitco News) - While gold is a stable investment and should be owned during financial downturns, uranium’s fundamentals look more favorable for a big price move in the short to medium term, this according to Lobo Tiggre, principal analyst of the Independent Speculator.
Speaking to Kitco News, Tiggre said that the collapse in uranium’s supply has created a real crunch, while the demand for nuclear energy is inherently less volatile than that of oil’s.
“The uranium market has been in a structural deficit for some time,” he said. “The mine supply hasn’t been enough for many years. And that’s worked, because some of the above-ground supply has come on the market, particularly in Japan after the Fukushima accident, there was a lot of uranium that came back on the market.”
However, this secondary supply has started drying up last year, Tiggre noted.
“On top of that, we have the current circumstance where mines are shutting down, and not just any old marginal mines, but the lowest cost producers in the world have already announced voluntary production cuts, like OPEC. On top of that, they’re saying that because of the COVID-19 situation, they’re likely to produce 16% less than anticipated,” he said.
Unlike oil, uranium is not as susceptible to demand loss, Tiggre added.
“Uranium is an energy commodity, and oil is an energy commodity, so the energy market is taking on the chin because of all the COVID shut-downs, and people using less energy,” he said. “But there’s an important distinction here, in that as shutdowns cause people to stay home, they don’t drive as much, some industries don’t produce as much because of reduced demand, that does impact energy prices, but not all energy is created equal. It impacts oil prices more.”