First: Uranium
The tightest areas in the uranium supply chain are downstream of the mine. Uranium itself (that is, processed ore) as we write, is at $86.90 per pound, roughly where it’s been since April. The two stages that come next — converting it into a gas, then “enriching” that gas by increasing the proportion of the fissile isotope — are historically expensive, and enrichment is at a record high. As we discuss below, that scarcity in the middle of the chain has the effect of raising demand at the top.
To explain why, first this brief orientation on the journey from ore to fuel.
From Element to Energy
Nuclear fuel reaches a reactor after four separate stages. Miners produce U3O8, the concentrate known as “yellowcake.” Converters turn it into a gas (uranium hexafluoride), because you cannot “sort” the various isotopes of uranium in the solid. Enrichers raise the share of the one uranium isotope that sustains a chain reaction, U-235 — up from the 0.7% found in nature to between 3 and 5%; this “sorting” is sold by the “separative work unit,” or SWU, which prices the effort of separation. Fabricators press the result into pellets.
A pound takes the better part of two years to make that journey, and a reactor that misses its refueling window loses months of output. So utilities tend to buy fuel early, in bulk, on long contracts, with little regard for price. Fuel is a small line-item that could idle a very large asset, which is why buyers are relatively price-insensitive (and sellers know it).
The Overfeeding Trick
Enrichment involves a trade-off: to end up with a given quantity of fuel, you can put more sorting effort into less raw uranium, or less sorting into more. When sorting is cheap, enrichers work the leftovers harder and release the uranium they no longer need back into the market; when sorting is expensive, they reverse it — they “overfeed,” pushing more uranium hexafluoride through the machines to economize on the costly step.
Conversion, the step before, is squeezed too: prices are off their peak but historically elevated, ConverDyn’s Metropolis plant, America’s only commercial converter, is ramping about 20% this year, and Orano’s French facility will manage some 9,000 tonnes against 13,000 last year.
Sorting is now at record prices. So the industry is overfeeding, and a bottleneck downstream of the mine converts directly into demand upstream of it. Bank of America argued last week that this alone makes a new all-time high in uranium feasible — which would mean clearing the 2007 peak near $136 a pound.
This raises the question of why nobody simply builds more enrichment capacity. Four companies do this work at commercial scale — Russia’s Rosatom, the Anglo-Dutch-German consortium Urenco, France’s Orano and China’s CNNC — and every one is government-owned or government-controlled, because the centrifuges that enrich uranium to 5% for a reactor will take it to 90% for a warhead if you keep them spinning. America has no enricher of its own at commercial scale: the single commercial-scale plant on its soil belongs to Urenco, and covers about a third of national demand.
This letter is general commentary — the wide-angle view. It is not a portfolio. What we do for the families we work with is the opposite of “wide-angle”: we make portfolios built around one household’s circumstances, taxes, timelines, and appetite for exactly the kind of volatility described above. We keep that roster of clients deliberately small, because that sort of attention doesn’t scale. If you’d like to talk about what it would look like for you, Aubrey Ford will make the time.
Capacity is being added, at the pace such things move. Urenco’s New Mexico plant turns out 4.3 million SWUs a year, that third of American demand; it is installing another 700,000 by 2027, call it a further five percent of what the country needs, and a further 2.1 million with construction beginning in 2029, first production in 2032 and full output in 2036. This would take the site past 7 million SWUs, better than half of present national demand, a decade from now. Centrus, a minor, not-yet-commercial-scale American-owned enricher, operates a small plant at Piketon, Ohio, and is building new capacity there on the strength of a federal award and contingent utility commitments; it begins to arrive from 2029.
The market’s shock absorber is draining alongside. For two decades a stream of recycled and stockpiled material has filled the gap between what mines produce and what reactors consume; it has fallen from roughly 65 million pounds in 2020 to 22 million this year. Overfeeding is one cause among several — the American-Russian deal that turned Soviet warhead uranium into reactor fuel expired in 2013, government inventory sales have shrunk, and the Japanese stockpiles released after Fukushima are spent.
So global term contracting is running below the level needed to stand still. The benchmark — the volume of publicly reported long-term contracts consistent with fueling the existing fleet — is about 150 million pounds a year. 2024 managed 110 million, 2025 some 116 million, more than half of last year’s total arriving in a single quarter at the end.
The 2028 Wall
American utilities are even further behind than that global picture suggests. A total ban on Russian uranium products entering the United States takes effect January 1, 2028. Russia supplied roughly a quarter of American enrichment services before the war, and that supply has already effectively gone. Utility behavior shows the anticipation: stockpiles held at U.S. reactors rose 3% last year, to 118 million pounds, while the enriched share of them fell to 44% from a 2023 high of 49% — the fingerprint of a ban on material that used to arrive from Russia already enriched. Seventeen months from a hard deadline, American utilities have locked in only 174 million of the 360 million pounds they expect to need over the next decade.
So, we have a commodity whose buyers are constrained, a conversion and enrichment squeeze that neither capital nor politics can unclog quickly, a vanishing cushion, and purchasers whose refueling dates are fixed years ahead buying into a market too thin to absorb them.
To us, to say it simply, this combination is bullish for the long-term price of the commodity.
Second: Gold
Gold peaked near $5,600 in January, fell almost 30%, and after its worst quarter since 2013, dipped below $4,000 in June. It is now above $4,400. Seasonally, summer months can be an air pocket for gold demand, but that dim period is ending. Data from Seasonax suggests that the latter half of the calendar year is typically when gold starts to glow brightest.
What normally follows runs on a harvest calendar. Indian rural income arrives after the monsoon crop; jewelers restock in September for Dhanteras and Diwali, on November 6th and 8th this year; the autumn wedding season runs into December; and Chinese gift-buying builds toward the Lunar New Year on February 6, 2027. That physical rhythm is why September has been gold’s strongest month for five decades.
This year the rhythm has a problem and a replacement. The problem, is that jewelry demand in the last quarter was the weakest since the pandemic, Indian jewelry purchases fell 15% year-over-year: at these lofty prices the traditional seasonal buyer is incrementally priced out. Also, Indians have experienced fuel price shocks and fuel price volatility that undermines spending on gold.
The replacement to sagging jewelry demand is — the official sector. Central banks bought 289 tonnes, 62% more than a year earlier, while the price fell 16%, and nearly nine in ten reserve managers expect global gold holdings to rise within the year. The first half was quieter than that quarter suggests, at 345 tonnes, it was the weakest since 2022 — a total that owes something to a downward revision of the first-quarter data — with Russia, Turkey, and Azerbaijan selling bullion to plug budget holes.
Get Used to Governments Being the Marginal Buyer
A few events recently are giving this a face.
1) The Bank of Korea — which bought gold from 2011 to 2013, and was pilloried when the price fell, then abstained for thirteen years — has said it will buy again.
2) An intervention in the dollar-yen came on July 29th, the dollar dropping 4% over the six days to its August 3rd low. Our esteemed friend Larry Jeddeloh of TIS Group reads that as trouble in Japan’s government bond market. Long-term borrowing costs climb when an economy strengthens, and also when lenders grow doubtful about repayment; gold responds to the second case.
3) In July, China made their largest monthly purchase of gold (20 tonnes) in almost three years. The Peoples’ Bank of China also just recently renewed liquidity injections after a four-month lull — that began shortly after the attacks on Iran and the closure of the Strait of Hormuz disrupted oil flows. PBoC easing liquidity again could just be a blip, or it could the start of some new policy directive. Nonetheless, it needs to be watched.
Thanks for listening; we welcome your calls and questions.
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