Goldman Sachs Enters Uranium Derivatives Market As Prices Double To $102 Per Pound

Goldman Sachs GS and Macquarie MCQEF, along with certain hedge funds, are strategically positioning themselves to capitalize on the newfound buoyancy in the uranium sector.

Unlike nickel, which faces increasing supply and waning demand, there has been a surge in uranium prices, doubling over the past year to reach $102 per pound.

Top producers like Kazatomprom NATKY  and Cameco CCJ have cut production guidance. A supply shortfall drove the price spike. Additionally, the revival of nuclear energy to reduce carbon emissions has contributed to the positive momentum.

The metallic chemical element is now above its long-standing cap at $30 per pound, “which also happens to be the global industry's marginal cost of mined production,” Liberum analyst Tom Price told Reuters.

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Goldman Sachs is writing options on physical uranium for hedge funds, marking the investment bank’s first derivative created for the metal. The bank has been steadily increasing its visibility and book in the uranium market.

Despite challenges like the Fukushima disaster in 2011 and subsequent plummeting prices in 2011, Goldman Sachs has maintained its involvement in the uranium market since 2009 after acquiring Nufcor, a London-based nuclear fuel trader. 

Following Fukushima, Goldman unsuccessfully tried selling the business in 2014. Macquarie was a prospective buyer, according to Reuters.

Per reports, Nufcor still held about $356 million worth of uranium inventories as of the end of 2022, allowing Goldman to make the market and start collecting the options premium on the underlying commodity it owns.

The growing interest in physical uranium is evident as financial institutions hold about 113 million pounds, equivalent to approximately 65% of the current annual global consumption by nuclear power plants. Various funds, including the Sprott Physical Uranium Trust SRUUF, Yellow Cake YLLXF, Zurich-Invest AG, and Kazatomprom-backed ANU Energy, are actively sourcing and storing physical uranium, contributing to the evolving dynamics of the uranium market.

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