The Yellow Metal to Own for the Next 10 Years

| About: Cameco Corporation (CCJ)
  • Deutsche Bank analyst predicts $1,550 gold for 2011
  • We're in the early stage of a huge uptrend
  • My strongest recommendation yet

Gold is entering a tenth straight year of gains, and if we're going to be honest with ourselves, that trend should give us pause before we add to a position in gold.

But don't sell your gold just yet. According to recent article from Bloomberg, there's still plenty of upside.

From the article:

Dan Brebner, an analyst at Deutsche Bank in London who is the most accurate forecaster so far this year, says the metal may reach $1,550.

Listen, I just bought some gold a couple weeks ago, and I'll likely buy some more over the coming weeks and months, but I'm looking out over the horizon for the asset to buy today, to benefit from the next decade-long uptrend.

I think I've found what I'm looking for.

And though I've written about this commodity before over the past six months, I'd be surprised if more than one or two of my readers have followed my recommendation to buy shares of companies that produce it.

Almost no one buys during the early stages of an uptrend - by definition. If everyone was buying, prices would not be low, and the upside would be very limited.

But right now, this other yellow metal is selling near its five year lows. This industrial metal is in a sector that's expected to have huge amounts of new demand from China and India. There's already steady demand from Europe and the United States that currently outstrips production.

The last time the market saw a supply crunch in this commodity, you could have made 500% gains in less than four years by buying one simple investment. I'll reveal the name of this stock in a minute.

The commodity I'm talking about is uranium.

You can see that uranium is selling near its five year lows. I think we're in the beginning of a long, steady uptrend for uranium prices.

And I fully realize that a thousand readers just clicked away from this page at the mere mention of the radioactive metal.

Even though Iran has been in the news nearly every day for the past few months with headlines about its nuclear power facilities, uranium is nowhere to be found in the mainstream investment media. No one cares - yet.

I'm sure we'll see lots of coverage on uranium prices after they begin to spike, but that's why I want to alert you to the trend today, so you can get in early.

So why is the price of uranium going to spike? Take a look at this chart:

For the past 20 years, demand has outstripped production. I've talked about this discrepancy in past issues of the Resource Prospector. On April 13, 2010, I wrote:

Where is the supply coming from to meet current demand? The answer is: nuclear bombs. A New York Times article from November 11, 2009, revealed that nuclear power plants in the United States get a large amount of their fuel from dismantled Russian and U.S. bombs.

From the article:

Salvaged bomb material now generates about 10 percent of electricity in the United States...

Today, former bomb material from Russia accounts for 45 percent of the fuel in American nuclear reactors, while another 5 percent comes from American bombs, according to the Nuclear Energy Institute, an industry trade association in Washington.

That's a situation that can't last forever. The program to dismantle bombs for nuclear fuel (called Megatons for Megawatts) has so far claimed to have produced 11,047 tonnes of uranium - or about 25% of the supply needed for one year. But even if demand stays the same, there is a very finite amount of de-weaponized uranium left in government stockpiles.

It's a matter of when, not if, uranium prices will spike. And an August 30th Reuter's story just might mark the beginning of the trend:

The nuclear renaissance is centered in Asia, where China plans to more than double nuclear power capacity by 2020.

At the same time, Russia says it will stop downblending weapons grade uranium from 2013, creating what some expect will be a 20 million pound hole in an already tightening world supply.

My recommendation is simple. One company currently produces the lion's share of uranium: Cameco Corp. (NYSE: CCJ). They own the world's largest uranium mine which provides about 17% of the world's uranium every year. No other mine even comes close.

I fully expect this company to multiply gains made in the price of uranium. I'd suggest buying this company now, today, and holding it for at least ten years. I firmly believe that there isn't a safer way to get rich from commodities today than to buy this company.

Disclosure: No position in Cameco as of this publication