Uranium and gold have been top of mind for commodity investors lately. Here's where I think we may be headed.
Uranium - Healthy Correction Presents Buying Opportunity
Uranium prices and equities saw a nice upswing earlier this year, but have pulled back some in recent weeks. In my view, this is a normal and healthy correction following the run-up. Corrections are a standard part of market cycles, allowing the market to consolidate gains.
Given growing risks of a recession in the US, I expect we could see some further near-term weakness in uranium prices and stocks. However, any such declines only present a buying opportunity in my view. The long-term fundamentals for uranium remain very bullish.
Demand for uranium is poised to surge in the years ahead as more nuclear reactors come online globally. Supply however remains heavily constrained with few new mines in development. This supply/demand imbalance suggests much higher uranium prices over the next decade. The spot price could easily spike $10-20 higher on any supply shocks.
So while we may see some choppy trading action near-term, the next leg higher for uranium appears imminent. Any pullbacks should be viewed as a gift to build positions in top uranium mining stocks before the inevitable supply shortages hit.
Gold - Short-Term Bearish, Long-Term Bullish
As for gold, I'm cautiously bearish on the short-term outlook but very bullish longer-term. The primary headwinds for gold currently are higher interest rates and the perception the Fed can successfully engineer a soft landing for the economy.
With Treasury yields spiking higher, many investors view bonds as a similar safe haven to gold, but with the added benefit of yielding 5%+ interest. This dynamic typically weighs on gold prices.
Additionally, recent economic data and statements from the Fed have supported the narrative that the economy can avoid recession. This reduces safe haven demand for gold in the short run.
However, expand the timeframe and gold's prospects look very bright. The sheer scale of fiscal and monetary stimulus in recent years means inflation is likely to remain elevated. And economic damage from rising rates will become more apparent over time as well.
Once the Fed's credibility on orchestrating a soft landing is lost, gold should regain its shine. I anticipate new nominal record highs, likely within the next 6-12 months. The drivers are already in place, we just await the trigger.
In summary, I'm cautiously short-term bearish but wildly bullish longer-term on gold. Any near-term declines or consolidation should be viewed opportunistically by investors. Gold remains one of the best assets to own in these uncertain times.