From uraium investors new the bottom is in..be very careful shorties!
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.