Uranium price rally explained: How this asset went from being 'hated' to 'liked' and what's next - Rick Rule
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(Kitco News) The uranium market is having a breakout year, with prices rising more than 50% year-to-date, reaching the highest levels in 15 years. According to Rick Rule, President and CEO of Rule Investment Media and former CEO and President of Sprott, the rally has a lot more room to run.
This surge in uranium prices is reminiscent of the environment before the 2011 Fukushima disaster, with uranium outperforming gold and the S&P 500. This renewed interest is spurred by the need for energy diversification, especially after the Russian-Ukrainian conflict and the global push away from fossil fuels.
Russia's significant role in the uranium sector and recent disruptions in Niger, another key uranium source, complicate the current market dynamics, Rule told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News, on the sidelines of the New Orleans Investment Conference.
"The price of uranium had to go up to the point where producers cover their cost of production, including cost of capital. It was absolutely inevitable," Rule said. "What made it imminent was the Japanese began to restart their nuclear fleet, which at once increased demand for uranium and reduced supplies. That happened in 2023."
The 'easy money' has been made, what's next?
In terms of uranium stock performance, the juniors have outperformed the seniors. However, that is about to reverse, said Rule.
"I suspect frankly that the easy money in uranium has been made. That first move where it goes from just absolutely despised to being tolerated is a good move," he noted. "I believe there's big money ahead, big speculative money ahead."
The market is now at a stage where more prominent names will outperform, including Cameco and Kazatomprom.
Cameco is already up more than 90% year-to-date, with Rule projecting more gains ahead as the generalist investor enters the market.
"The bigger names will outperform for two reasons. They have large amounts of material they can bring back into production that's already permitted and built. All they need to do is turn the mines on, and the structure of the market has changed," Rule explained. "My suspicion is for the next 18 months, the wind is in the sails of the Camecos and the Kazatomproms of the world."
The second reason is the new pricing mechanism currently used in uranium. For Rule's breakdown on how it works and its impact on the market, watch the video above.
Rule also gives his top investment picks. Watch the video above for names and price predictions.
Gold demand to quadruple
With the U.S. facing rising debt and surging deficits, Rule said he sees gold demand quadrupling.
"I don't own gold because it might go from $1,925 to $2,100. I own gold because if things go wrong, it triples and quadruples in price," Rule said.
Rule projects that demand for gold will revert to its 40-year mean, meaning that demand for the precious metal in the U.S. would increase fourfold. For a breakdown of why this will happen and what it means for gold, watch the video above.
Special coverage of the New Orleans Investment Conference is brought to you by Discovery Group.