Democrats’ win puts US mining agenda under scrutiny

Democrats' victory in Tuesday's midterm elections could lead to increased scrutiny of President Donald Trump's mining and energy policies, while also possibly opening up opportunities for bipartisan cooperation on energy affordability. The party secured control of both the House of Representatives and the Senate, which will result in a divided government from January.

This shift in power may lead to tighter regulation of data center construction and closer examination of federal investments, as well as the possibility of permitting reform, according to assessments from BMO and Wood Mackenzie. Scott Anderson, BMO Capital Markets' chief US economist, stated that many aspects of the Republican policy agenda will likely face challenges in the upcoming two years.

However, Democrats will have limited ability to reverse existing legislation without presidential cooperation, so the outcome will depend on how cooperation unfolds.

For miners, the election's outcome will test the durability of Trump's mining agenda. Democrats have already challenged Washington's financial stakes in mining companies and questioned the terms of a bipartisan permitting proposal. Their stronger negotiating position could potentially reshape that legislation, while scrutiny of data centers might impact a growing source of copper demand.

The prospect of greater scrutiny of federal mining investments has been a concern for Democrats even before the election. Senator Martin Heinrich and Representative Jared Huffman, leading Democrats on the Senate energy and House natural resources committees, sought a watchdog investigation in August to examine financial safeguards and potential conflicts of interest when Washington acts as both investor and regulator.

Democrats' control of the government could also lead to investigations into presidential family interests in companies, appointments of officials, ambassadors, and judges being blocked or delayed, according to BMO.

The possibility of stricter regulation could slow data center development, potentially easing inflationary pressures, as noted by BMO. In contrast, Wood Mackenzie believes that the pressure to lower electricity costs could encourage both parties to expedite infrastructure approvals. The outcome remains uncertain, as the risk of policy stagnation and regulatory confusion persists due to entrenched partisanship.

Gold and copper prices reacted differently to the election results, as per TD Securities strategists Ryan McKay and Bart Melek. Constraints on Trump's fiscal agenda could help push the dollar and longer-term Treasury yields lower, and gold could once again surpass $4,000 per ounce. Copper initially weakened due to increased scrutiny of artificial intelligence data center construction but has since recovered, driven by tight physical supplies, particularly in China, which support prices.

The potential for AI regulation could challenge a significant source of stock market gains, according to Russ Mould, investment director at AJ Bell. Gold rose 2.7% to $4,038 per ounce, as investors sought protection against uncertainty over Trump's response to the election result.