Uranium Squeeze: Price Driver or Fleeting Trend?

Will uranium be the next market to benefit from a Reddit bump?

Members of the digital collective helped push GameStop (NYSE:GME) shares and silver prices up earlier this year, and now attention appears to be centering on the uranium space.

The GameStop saga began in January, and saw members of Reddit’s WallStreetBets forum drive their favorite stock through the roof. Company shares reached an all-time high of US$324, a bump of over 5,000 percent year-over-year, before declining to the current level of about US$160.

Soon after the GameStop short squeeze started attracting interest, another faction of Redditors set their sights on silver. WallStreetSilver users began snapping up the metal, with their actions ultimately pushing silver to a year-to-date high of US$28.55 per ounce on February 1.

Silver wasn’t able to stay at that high point, but the attention seems to have supported a higher price threshold — the white metal is now holding at the US$25 level, which it hasn’t maintained since 2013.

Amid this activity, another squeeze-related Reddit segment emerged. Called UraniumSqueeze, this part of the online forum is home to investors interested in uranium’s clean energy potential, as well as companies in the space. Despite its name, the focus isn’t on squeezing uranium prices or stocks, but its development does seem to have drawn more eyes to the sector.

“As with a lot of the Reddit buzz that we saw, it can be fleeting at times. But it did raise the visibility of the uranium industry,” said Rohan Reddy, research analyst at Global X ETFs.

The uranium space has long grappled with public perception issues, and its image has only begun shifting over the last five years.

“Unlike some of the others out there, like GameStop or silver, uranium is a bit of a nascent industry,” said Reddy. “So typically, when you get a little bit more exposure in the media on these individual securities, it does kind of drive up interest within the rest of the industry too.”

The increased interest has been welcomed by the market, although it’s still early days.

“Even though it doesn’t necessarily translate into profit in any way, because it’s not really rooted in fundamentals, it’s more just technical buying, it did introduce a little bit more liquidity into the market, which I think is a good thing,” explained the analyst.

That sentiment was echoed by Lobo Tiggre, founder and editor of Independent Speculator.

“I think (Reddit attention) would have a far greater impact on uranium, if such a push were to gain traction,” said Tiggre. “Uranium is a smaller market, and the crowdsourced effort would not be trying to break any major financial institutions.”

Shifting social interest into market growth

In the months since UraniumSqueeze launched on Reddit, a number of interesting developments in the uranium market have encouraged those following the space.

Uranium consumption in the US has again become a focus after former President Donald Trump’s stockpile plans lost steam. Current President Joe Biden has now committed to advancing the small modular reactor industry globally through American innovation.

Aside from that, companies including Denison Mines (TSX:DML,NYSEAMERICAN:DNN) and US-based UEC (NYSEAMERICAN:UEC) have recently announced plans to acquire physical uranium, spurring conversations around tightening supply and potentially higher prices.

There has also been growth in the exploration and royalty side of the sector, a trend Tiggre linked to investor exuberance. “Whether it’s rational or irrational remains to be seen,” he said.

“More specifically, I think we’ve seen significant new institutional buying. I don’t think the population of uranium bugs suddenly doubled in recent months,” Tiggre continued. “I think some deep-pocketed entities see the ‘when, not if’ writing about uranium on the wall, and have been building positions in advance of uranium prices breaking out again.”

Although explorers have seen related share price growth, that same progress didn’t translate across the board for producers. However, as Tiggre explained, there are miners that did benefit.

“One big company located somewhat north of here has had a great run over the last six months. So has the biggest, cheapest producer in the world,” he said. “But at any rate, producers are supposed to make money, so it’s no surprise if some shareholders lose patience with them when they don’t.”

As of the first week of May, the U3O8 spot price was at US$28.65 per pound, slightly below the year’s top level. With fundamentals seemingly improving by the day, the market continues to wait for a breakout.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

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