Nuclear power is a type of energy that comes from uranium. It is unique because it can help us avoid using fossil fuels. It has environmental and social benefits. However, mining uranium can harm the environment if not done responsibly. Radioactivity can also be hazardous if there is an accident. And no one wants nuclear waste in their backyard.

On the other hand, nuclear energy can supply a consistent stream of power while emitting no coal or natural gas. It is not as susceptible to the on-and-off nature of solar and wind energy.

In a recent infrastructure package, the United States put aside billions of dollars to assist the next generation of nuclear reactors. The European Commission is developing a draft language that would include nuclear power “as a method to support the transition to a largely renewable-based future.” On the supply side, the recent unrest in Kazakhstan, the world’s largest uranium producer, has contributed to increased prices.

The price of uranium futures has increased by around 40% in the past year. Investors might explore the following options for gaining exposure to anticipated future price increases:

  • Uranium stocks
  • Exchange-traded funds
  • Futures
  • A physical fund
  • Royalties

Risks of Investing in Uranium

Before investing in uranium, investors should consider the risks. Matthew Tuttle, CEO of Tuttle Capital Management, warns that the uranium market is volatile. Any commodities-related investments can be very volatile because they are closely tied to the economy. That is especially true for uranium, which also fears radiation and accidents.

Jeff Burrow, the lead advisor with Sierra Ocean, says that uranium prices are susceptible to how people feel about it. If the citizens of a country stop wanting nuclear reactors, there will be less demand for uranium, and its price might go down.

Uranium Stocks

Suppose you are willing to take a risk and hope for a reward. In that case, one way to invest in uranium is to buy stocks of companies focusing on mining uranium. Cameco Corp. (ticker: CCJ) and Kazatomprom (KAP) are good examples. There are also smaller producers such as Energy Fuels Inc. (UUUU) and Ur-Energy Inc. (URG). If you choose less risk, invest in equities of diversified uranium miners such as BHP Group (BHP) and Rio Tinto Group (RIO) (RIO).

Investing in diversified miners does give some exposure to uranium while at the same time providing a cushion if prices for that commodity fall. But putting money into smaller companies focused on radioactive metal can offer more rewards if uranium prices rise because these companies expect the price of uranium to go up in the future.

There are risks associated with investing in individual mining stocks. Such risks can include:

  • Political risk.
  • Increasing production costs.
  • Declining ore grades.
  • Balance sheet risk.
  • The dangers of potentially poor management decisions.

Uranium ETFs

People who want to invest in the mining sector and other players in the nuclear energy industry but don’t want to pick individual stocks can use exchange-traded funds. These funds invest in various stocks yet trade under a single ticker on an exchange.

The North Shore Global Uranium Mining ETF (URNM) buys shares in companies involved in mining, exploring, and producing uranium. They also invest in companies holding physical uranium, royalties, or other non-mining assets. The VanEck Vectors Uranium+Nuclear Energy ETF (NLR) invests in miners, nuclear utilities, nuclear power plant builders, and businesses that supply the nuclear power industry. The Global X Uranium ETF (URA) invests in companies involved in uranium mining and producing components for the nuclear industry.

When uranium prices are volatile, adding nuclear utilities can help. When the metal’s price goes down, the utilities that need to buy it don’t lose as much money. Utilities are also considered good investments during an economic downturn because people will always need electricity. However, uranium demand might decrease in an economic recession because manufacturers won’t need as much electricity.

Uranium Futures

You can trade uranium futures, but you should only do this if you are an expert. The CME Group Inc. (CME) offers monthly contracts in U.S. dollars per pound. Each contract unit is 250 pounds, but because they are financially settled, you can’t take delivery of that and end up with a pile of fissionable material on your lawn.

Burrow says that using futures contracts to invest in uranium is a difficult thing to do. Futures contracts are always volatile, but the lack of liquidity in uranium makes this type of investment even riskier. Investing this way is not advised unless you want to gamble on the price movement.

Physical Uranium Fund

Another way to invest in uranium is to buy Sprott Physical Uranium Trust shares. This trust is the only publicly listed one holding physical uranium. As of January 7th, the trust had amassed 42.7 million pounds of uranium, up from 18.1 million pounds when it launched in July.

Royalties

Another investment option is Uranium Royalty Corp. (UROY). This company invests in uranium companies in return for royalties or other interests. It also buys physical uranium. Uranium Royalty Corp. claims it is ideally positioned to give cash to the sector, which has to invest heavily. There is enough nuclear energy to enhance global uranium production, which does not emit greenhouse gases.

Frequently Asked Questions About Investing in Uranium

Is Uranium a Good Investment in 2022?

Uranium experts predict that the price of uranium will surge significantly in 2022. Because the supply is unlikely to rise soon, you should be prepared for volatility. You could invest a small portion (less than 5%) of your portfolio in uranium stocks.

Why Do We Invest in Uranium?

Uranium is being used more and more to fuel electricity. It means that the demand for nuclear power and uranium is going up. People who invest see this as a good sign because it means there is potential to make money from the demand.

Will Uranium Prices Go Up?

The price of uranium will reach $66.17 in the next year. This number could change depending on what happens in the market. Sprott Physical Uranium Trust is buying a lot of uranium right now, which could cause the price to go up.

Will Uranium Prices Continue to Rise?

Assumptions made by analysts and global macro models at Trading Economics are uranium will trade at $48.07 a pound by the conclusion of the current quarter. We estimate it to trade at $52.59 in 12 months.

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