Though the spot price of uranium has fallen to US$34.50/lb.—a far cry from the US$140/lb it fetched a few years prior—how important is the spot price of uranium? The answer: not as important as the long-term price. In fact, over six times more uranium is traded in long-term market prices than in the spot market price. Most investors in the commodity universe understand the spot price for metals. A simplified definition of the spot price is what the metal costs to buy or sell right now, minus the commissions and fees. Oil, for example, trades billions of dollars a day on a spot price. For copper producers, unless they are hedged, the spot price is the price that matters to them when they sell their production.
The Dubious Uranium Spot Market
say dubious because less than 15% of the metal is actually traded on
spot prices. In the uranium sector, there are two types of markets: the
spot price (less than 15% of the market—and as low as 5%); and the
long-term price (over 85%). Currently, the long-term price for uranium
is over 50% higher than the spot price. The long-term uranium price is
currently set at US$57 per pound, whereas the spot price as of this
writing is US$34.50.
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Today 50-year veteran Art Cashin warned about major concerns in the gold market because of declining gold inventories. Cashin, Director of Floor Operations at UBS ($650 billion under management), also cautioned about the backwardation in gold, and noted the massive global demand as well.
Art Cashin: “All That Glitters Is Not Arbitrage – Monday, spot gold spiked up $45 and the media pundits pointed to things from China to the FOMC. While all the cited may have been factors, veteran traders saw the bulk of the move resting in a conspiracy story.
In my mid-day email to friends I had noted this:
Gold soars as NYT story on metal warehouses fans flames of conspiracy theorists that gold warehouseREAD MORE
stores have been “lent” out. That theory also aided by backwardation (spot price far above near future).