Uranium price forecast for 2011 and 2012

How high will uranium prices go in 2011 and 2012? Spot prices have been on a tear rising 70 percent in the past seven months.

One of my favorite investments right now is often one of the most undervalued by investors: uranium. As the general public fixates on wind and solar energy as the rock stars in the transition to green power, it’s coming increasingly clear that nuclear power will play a major role in getting countries around the world off of coal and oil.

Uranium prices have been on a tear rising 70 percent in the past seven months. In January alone, the spot price for uranium shot up 17 percent to $73 a pound, according to the Financial Post.

How high will uranium prices go in 2011 and 2012?

At least one analyst, Patricia Mohr, vice-president of economics and commodities specialist at Bank of Nova Scotia, sees prices hitting $85 by the middle of 2012. She cites the Megatons to Megawatts program’s end in 2013 as a big factor in the upward pressure on prices. The 20-year agreement between Russia and the U.S. mandated that the two countries convert 500 tons of weapons grade uranium into useable fuel for power plants. With the deal set to expire in two years, uranium supplies will be strained.

“While that seems like a long time from now, countries need to plan ahead,” Mohr tells the Financial Post.

A confluence of other factors are expected to push uranium prices higher in the near and long-term. Flooding in a major Australian uranium mine owned by Energy Resources of Australia Limited (ASX:ERA) will put short-term strain on supplies. Demand increases are expected in just about every country in the world, from South Africa to China, Canada and the U.S., and stocks that hold physical uranium including Uranium Participation Corp. (TSE:U) could manipulate spot prices on the open market.

President Obama’s declaration, too, that the United States’ need to move to cleaner energy is tantamount to another “Sputnik Moment” proves not that the government is committed to cleaning up the environment so much as a concession that green energy is a matter of national security as prices for coal and oil are expected to surge in coming years. Solar and wind power get the press, but uranium will be the backbone in any move toward a greener economy.

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