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What effect has Brexit had on Gold and the wider Mining Industry?

Posted by: Judith Kitchin

There’s been much speculation about what the Brexit vote could mean for mining both long- and short-term, but in reality the referendum hasn’t really touched mining so far thanks to benefits from the weakened pound – given that mining companies don’t make their profits in GBP. The London Stock Exchange is likely to continue to be home to the likes of Rio Tinto, Anglo American and BHP Billiton.

Brexit may even prove to be a boost to Mining, as the decision for the UK to leave the EU may hinder plans to close coal-fired power stations – even past its self-imposed 2025 deadline.

One issue which businesses may want clearing up on the subject of Brexit is tender processes for EU and EEA public bodies – this will be determined by the relationship built between the UK and the EU in the 2 coming years. In the outcome that the UK agrees to the European Free Trade Association or the Government Procurement Agreement, UK companies would still be able to tender for public projects.

After just 2 months since the Brexit vote, it’s probably a little early to be making any long-term predications with regards to the state of the market, but it’s been a tumultuous time. Gold prices soared in July to the highest level since 2014 after the UK voted to leave the EU – China, the world’s largest producer and consumer of gold, cut its purchasing after the Brexit vote.

But of course 2016 has been a fantastic year for gold – with prices in early August up 28% on the beginning of 2016, and in the summer investors have been taking on gold as a safe haven from Brexit uncertainty (The Financialist, August 4th 2016).

We haven’t seen a price surge like this since 2011 when gold reached record highs of $1,910. But we all know what happened after that… a surge in the industry, with Mining companies expanding production, even of mines which would only stay profitable if the price stayed so high. Only time will tell.

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