Uranium prices are soaring. Investors should be careful

It is, by now, a familiar story. A metal previously only traded in a sleepy corner of commodity markets becomes vital for the energy transition. Constrained supply and geopolitical jockeying meet forecasts for ever-rising demand. Prices surge as investors foresee a crunch. The only wrinkle in the story is that this time the metal is not used in electric vehicles or solar panels; it is used in the decades-old technology of nuclear reactors. Uranium prices are blowing up.

Hoarding uranium oxide—which, once processed and enriched, is the main fuel for nuclear bombs and reactors—might seem like a strategy more suitable for supervillains than investors. But speculators now have a number of ways to gain exposure. Stockmarket darlings include Yellow Cake, a firm that buys and stores the stuff, whose share price is up by 160% over the past five years, and Sprott Physical Uranium Trust, a fund that does the same and has enjoyed returns of 119% since its launch in 2021. Hedge funds have got in on the action, too, reportedly stockpiling the metal and buying options on uranium from banks.