Miners surge as gold hits a rich seam

Gold miners bucked wider falls on the London market yesterday as the cost of the precious metal soared to fresh record highs.

Investors flocked to the safe haven of gold as stocks on both sides of the Atlantic slipped into the red, with the dollar also under pressure following cautious comments from the US Federal Reserve.

The FTSE 100 index closed 24.28 points lower at 5,551.91, while the Dow Jones Industrial Average also fell in volatile early trading.

On Tuesday night, the US central bank kept the door ajar for more action to stimulate demand, but stopped short of providing specific detail.

The flight to safety meant the price of gold set its latest high at $1,296.2 an ounce, while the greenback fell sharply against other major currencies.

The pound was also under pressure after minutes from the Bank of England's latest monetary policy committee meeting reinforced expectations that interest rates will remain at a record low of 0.5 per cent for some time. Sterling regained early losses as the dollar weakened but fell almost 1 per cent to €1.17.

The ascent in the price of gold meant African Barrick Gold and Randgold Resources were high up on the risers' board in London, up 14.5p to 601p and 180p to 6,490p respectively. Other commodity stocks were also higher, with Xstrata 31p stronger at 1,198.5p and Rio Tinto up 82.5p at 3,652.5p.

Will Heddon, sales trader at IG Index, said: "Whenever you think the market looks quite rosy, look where gold is. If it's still at its all time high, that paints a wide picture on how the sentiment is."

The risers board also included Imperial Tobacco, which climbed 2 per cent - up 32p to 1,925p - after the world's fourth-largest tobacco group said it remained on track to meet expectations with revenues forecast at 3 per cent for the year to September.

Insurers were among the heavy fallers, with Aviva down 20p to 397p and Prudential off 6p to 613p. Marks & Spencer was also under pressure with a fall of 4.5p to 376.8p.

Banks also dragged the Footsie lower, weighed down with concerns over the US economy.

Royal Bank of Scotland fell 1.08p to 47.5p, while Lloyds Banking Group 1.05p lower at 75.85p and Barclays was down 4.9p at 306.7p.

Another quiet session for corporate news was dominated by the announcement from FirstGroup that its founder and chief executive Sir Moir Lockhead planned to leave the transport business at the end of March.

He will be replaced by former London Underground boss Tim O'Toole, but the announcement came as little surprise to investors as shares remained close to their opening mark with a drop of 1.9p to 349.5p.

The biggest rise in the FTSE 250 Index came from Shanks Group following market speculation of fresh takeover interest from US private equity firm Carlyle.

The waste disposal group walked away from talks with Carlyle earlier in the year after rejecting an offer at 120p a share.The shares jumped 6 per cent or 6.7p yesterday, but at 110.2p are still below the offer price earlier this year.