Investing in a Uranium ETF

Answer 1

Exchange traded funds (ETFs) allow an investor to own shares in a basket of securities like stocks, bonds, and other securities. Their price is often tied to a market index, like the Down Jones Industrial Average or the NASDAQ. They have become increasingly popular over the last few years with investors.

Contrary to popular opinion, ETFs are not just for stocks. An ETF can be created around any type of asset with a published index. real estate and bond ETFs are now available.

Uranium is a radioactive metal mined because it is used as nuclear power plant fuel. Although there are other uses for uranium, the price is driven by its role in power generation. Kazakhstan is the world's largest uranium producer, furnishing about one quarter of the world's uranium supply. Unlike other commodities, the uranium itself is not traded on an exchange, but is bought and sold in private arrangements between users and producers.

After the 2011 Fukushima nuclear plant disaster, some Western governments established a moratorium on starting new nuclear power plants, and some stated plans to end nuclear power generation outright. As a result, the price of uranium has fallen from $75 to about $50 as questions have been raised regarding long-term demand.

So investing in a uranium ETF can be a play on the global economic outlook for developed countries. If economic growth continues in these countries, more nuclear power plants will come online and increase the demand for uranium.

As of now, there is only one pure uranium play- the Global X Uranium ETF. There are, however, other ETFs that are related to companies involved in uranium mining. This is the case because uranium is a natural security concern, given its role in the production of energy for various countries.

Although not a pure uranium play, the Market Vectors Uranium+Nuclear Energy ETF has some exposure to the uranium sector. It holds 23 securities related to the nuclear energy industry, and its exposure is broader than Global X Uranium. Regional exposure for this ETF is 50% for the United States and Canada, and 25% for Japan, Europe, and Australia.