Forget about gold and silver for a while. There’s a better trade taking shape in a different metal.
As I mentioned last week, gold is in need of a break. It ran up ahead of the Fed’s latest quantitative easing announcement, and it spiked even higher on the news. Silver did the same thing. They’re both a little overextended to the upside right now.
So while gold and silver are good long-term investments, traders will probably get a better shot at buying them a little cheaper sometime over the next few weeks.
[ad#Google Adsense 336×280-IA]In the meantime, uranium looks good…
Uranium is an industrial metal, used primarily as fuel for generating nuclear power.
Many of the same factors that drive gold and silver higher typically push uranium prices higher as well.
But that hasn’t happened… yet.
Uranium didn’t budge after the Fed’s announcement.
It was trading at $48 per pound before the Federal Open Market Committee meeting, and it’s still $48 per pound.
That may have something to do with Japan announcing it’s getting out of the nuclear power business in about 30 years. Fears of decreased production of nuclear energy three decades from now may have temporarily kept uranium prices from reacting to the money printing news the same way gold and silver did.
And that’s opened up a short-term trading opportunity.
Japan’s news is a long-term development, and it will affect the price of uranium over the long term. But with massive money printing from central banks across the world happening right now, that should put a floor beneath the price of uranium and start pushing it higher soon.
To get an idea of the potential behind this trade, we only need to look at how uranium behaved following the last quantitative easing announcement back in November 2010.
Back then, uranium was trading for $48 per pound – the same price it is today. Four months later, it was over $70 per pound. The metal started rallying immediately after the Fed’s announcement… and it kept rallying for 15 of the next 16 weeks. Uranium was the strongest and most consistent-performing metal during that time.
The price peaked in February 2011. In March, the disaster at the Fukushima nuclear power plant sent the price of uranium into a tailspin… back to today’s price of $48 per pound.
That leads me to today’s opportunity.
You see, with gold and silver already extended to the upside and at risk of waffling back and forth for a few weeks, traders are going to look for other precious metals and resources that performed well during the previous quantitative easing cycle… but haven’t yet responded to the Fed’s latest announcement. The clear choice is uranium.
Of course, you and I can’t go out and buy a bunch of uranium the same way we could buy physical gold or silver. The government is a little fickle about radioactive material in civilian hands.
But we can buy uranium mining stocks.
Cameco (CCJ) is the largest and best-known uranium stock around. It was trading for about $28 per share before the second round of quantitative easing was announced in November 2010. Four months later, it peaked at $42. Today, CCJ is around $21 per share. And it hasn’t budged since more money printing was announced 10 days ago.
Of course, there’s no guarantee history will repeat and uranium will respond to more quantitative easing the way it did last time. But if it does, uranium and uranium mining companies could be sharply higher just a few months from now.
Best regards and good trading,
Jeff Clark
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Source: The Growth Stock Wire