Once In A Lifetime Opportunity In The Uranium Mining Sector

The spot price for uranium hit a nearly 8-year low a few weeks ago falling to $34.50 per pound U308 before gaining back $1.25 last week. According to TradeTech, very few buyers are in a “have-to” purchase position and most sellers are in a “need-to” sell position. This precarious situation in the spot market exists despite the fact that “long term world energy consumption is projected to increase 56 percent by 2040, and nuclear power generation is expected to double, according to the US Energy Information Administration,” explained the industry consultancy firm.

If the long term demand picture looks price positive, why is that not reflected in the spot price? Uranium Investing News asked uranium bull and stock guru Jeb Handwerger, editor of GoldStockTrades.com to give us his insight into what the spot price really tells investors and why he’s still excited enough about this sector to stay invested in uranium mining stocks.

UIN: It seems to me the uranium spot price is more of an indicator of where the market has been, not where it is going. How should investors interpret this continuing slump in the spot price?

Jeb Handwerger: The uranium market is not like oil or copper, or even gold. Very little uranium is actually traded on the spot market. The large majority is bought and sold through long-term contracts. We’re seeing a huge spread now between the spot price and long-term price, about $20 per pound. Historically, most of the time, the spot price and the long-term price are usually closer together. When there is a spread it is usually marking an emotional time period of either unbridled euphoria or gut-wrenching pessimism. Divergences between spot and the long term price could mark the end of an extended trend.

The spot price is more of an indicator of sentiment in the current uranium market. The price divergence can show either greed or fear. For instance, in the run up of the spot price in 2007 to $138 per pound, the long-term price only reached $90. The $40 difference between the spot price and long-term price was indicative of the euphoria in the market place. Now, when you see the spot price so severely discounted compared to the long-term price it’s a sign of fear and panic. This disconnect is something investors should watch because it’s a characteristic of negative, fear-based selling. For a contrarian investor it represents opportunity. Smart money recognizes the bottom. The spot price is a lagging indicator. Whenever you see the spot overextended over the long-term, time to sell because we might be in a bubble. When you see the spot price severely discounted compared to the long-term price like we are seeing now, it’s usually a sign we’re nearing a bottom and is a much better buying opportunity.

UIN: Despite the negative press, you’ve remained a confident uranium bull. What about this sector strengthens your resolve?

Read the rest of the interview by clicking here….

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I also did an interview with John Manfreda from Wall St. For Main St.  about the resource sector and how it may be a once in a lifetime opportunity.  Despite tapering expectations trillions of dollars have been created out of thin air by Central Bankers.   Precious metals and commodities are the greatest hedge against a possible inflation.  Eventually, long term investors in hard assets and mining stocks will be rewarded.  This recent bear market causing ridiculously low valuations could be the opportunity of a lifetime for patient and wise contrarian investors.

 
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