2024 belongs to an offbeat pairing — uranium and gold

As demand for EV and base metals is expected to slow along with global growth in 2024, two very different metals are likely to stand out from the commodity pack: gold and uranium. 

Gold, prized throughout human history, is virtually indestructible. That means most of the over 6.7 billion oz. of the metal the World Gold Council estimates has ever been mined is kicking around somewhere, whether as a wedding ring or in a 400-troy-oz. gold bar stored behind blast-proof gates at the ultra-secure Fort Knox gold vault in Kentucky. 

Uranium, meanwhile, was more recently discovered. It was first mined for radium (a decay product of uranium discovered by Marie and Pierre Curie) in the early 1900s and was erroneously thought to have anti-cancer properties. It was then mined on a much larger scale starting in the 1940s in the race to create the first nuclear weapons. Energy is now the dominant use for uranium, which has become more valued for its climate-friendly qualities than its potential for destruction. 

Both gold and uranium are coming off strong performances in 2023. 

Gold’s ‘new era’ 

Gold showed surprising resilience in the face of four interest rate hikes (in addition to seven the previous year), and in mid-December was around US$2,019.60 per oz. That’s above the magic US$2,000 resistance level and 10.7% higher than the start of the year.  

Geopolitical risks have stoked safe haven demand for gold over the last several years. Those tensions (with Russia, China and more recently over the Israel-Hamas war) appear unlikely to disappear. But in a new development that should support high prices, central banks are stepping up as buyers. That’s notable because they have deep pockets and a mandate to buy, say commodity analysts. 

“I firmly believe we have entered into a new era for the gold market,” Colin Hamilton, commodities analyst at BMO Capital Markets, said on BMO’s Metal Matters podcast in mid-December. 

“The jewelry and retail investment-led period ended about a decade ago, when macro asset allocators became central to price formation in this market. Now, we are entering the central bank-led era, with emerging market institutions to the fore.” 

What that means, Hamilton says, is that the buyers setting the price of gold are now well-funded central banks that won’t balk at higher prices as they seek to diversify their reserves away from U.S. dollars, rather than price-sensitive retail investors. 

BMO analysts in a Dec. 13 note also pointed to China’s growing influence on the gold market, both directly through central bank and consumer purchases, and by leading other markets to “de-dollarize.” 

All of that, and the consensus that interest rate cuts are on the way, should make for a strong period for gold. BMO recently revised its average forecast price for 2024 to US$1,950 per oz., up 13% from its previous forecast. New York-based CPM Group expects gold to set new record highs over the next two years, with the price averaging well above US$2,000 per oz. in 2024, and rising above US$2,100 per oz. in 2025. 

Uranium surge 

Uranium has already seen an impressive gain of nearly 70% in 2023, with the spot price rising to US$82.30 per lb. U₃O₈ in mid-December from under US$49 per lb. early in the year. Through most of the year, the heavy metal has been propelled higher by tightening supply and rising demand. 

A combination of geopolitical, climate and supply concerns could push the uranium price even higher in the new year. 

First, nuclear energy got a new level of endorsement at the COP28 UN climate conference in Dubai. In early December, 24 nations signed a statement supporting tripling global nuclear energy capacity in recognition it will be key to meeting net zero global emissions by 2050. They also pledged to mobilize investment in nuclear power and called on the World Bank and other international financial institutions to do their part in making funds available. Signing nations included Canada, the United States, Japan, South Korea, the United Arab Emirates, the U.K. and France. (Germany, which shuttered its last operating nuclear plant in spring 2023, in spite of its ambitious target to achieve net zero by 2045, was not a signatory.) 

Nuclear energy also got a call out in the “Global Stocktake” agreement hashed out by participants at the end of the conference. That was the first time nuclear energy was specifically included in the document as one of the low-emission technologies worthy of an accelerated scale-up. The name-check was deemed “a historic milestone” demonstrating a new global consensus on the importance of nuclear energy by International Atomic Energy Agency head Rafael Mariano Grossi.  

In the U.S., recent legislation could have a more immediate impact on prices. Seeking to cut its reliance on Russia, which supplies more than one-fifth of its uranium, Congress passed a bill in December that would require the U.S. to source a portion of its nuclear fuel domestically. The bill calls for 20 tonnes of HALEU — high-assay low enriched uranium fuel needed to run most advanced reactors in the country — to come from domestic sources by the end of 2027. It now awaits President Joe Biden’s signature. 

Another bill that aims to block all Russian imports of uranium by 2028 was before the Senate in mid-December.  

These developments could lead to dramatic price rises given the tight spot market, Red Cloud mining analyst David Talbot said in a Dec. 11 note. 

“The threat of the Russian ban has already impacted market sentiment, but the impact on the spot market already past US$82/lb could be huge,” Talbot wrote. “We may see immediate panic and speculation leading to a spike (overshoot) before the market settles.”