Physical Uranium trades at a 12-year high; is it still a buy?

Last month, I argued in this article that Uranium mining stocks are promising, given improvements in the pro-nuclear sentiment. It is, perhaps, interesting to have a look at how investments in Uranium performed recently and what to expect from now on.

The recent past performance is nothing short of impressive.

First, the Uranium spot price reached a 12-year high in September. YTD performance by the end of September was +51.88%, and in the last five years, Uranium delivered +21.48%.

Second, Uranium mining equities, measured by the Northshore Global Uranium Mining Index, are up +50.61% YTD and +25.73% in the last five years.

Third, Uranium junior mining equities, as measured by the Nasdaq Sprott Junior Uranium Miners Index TR, gained +39.03% YTD and +54.54% in the last three years.

A quick comparison with other asset classes, Uranium and Uranium miners, in the last five years, outperformed US equities, as measured by the S&P 500 index, US bonds, and the US dollar.

What drives Uranium prices higher?

Energy demand is forecast to increase exponentially in the upcoming years. Moreover, geopolitical tensions (i.e., Russia’s invasion of Ukraine led to a race to reduce the dependency on Russian energy in Europe and look for other alternatives) increased the need for energy diversification.

Furthermore, climate change cannot be denied anymore. To reach the targets, governments must invest in cleaner energy.

Uranium is a solution.

More precisely, Uranium has a key role in small modular reactors, which are anticipated to be common by the decade’s end.

If we add the fact that Uranium’s price was depressed for many years, one may say that the upside potential remains intact even though Uranium trades at a 12-year high.