Market Report

GOLD-RELATED issues rallied last night as investors, worried by the risk of inflation as central banks pour ever more money into flagging economies, hedged their bets by buying into the precious metal.

The US Federal Reserves decision to buy $300bn (207bn) of sovereign debt prompted the move, with the market fearing others such as the European Central Bank, which has been sitting on the sidelines as the Bank of England and the Bank of Japan make similar moves, will have to follow suit.

The Feds move has already weakened the dollar, and a similar move elsewhere promises to hit other safe haven currencies. This is likely to leave hard assets such as gold as the only true hedge against the rising risks of out-of-control inflation at the back end of this economic cycle, according to Liberum Capital.

Gold, the anti-dollar, had a spectacular move after its pre- announcement weakness, the broker said, highlighting the jump from around $888 per ounce before the Feds announcement to $932 per ounce at the start of play yesterday.

By the afternoon, the gold price had swung comfortably past the $950 mark, boosting the share price of London-listed miners such as Randgold Resources, which surged by more than 16 per cent or 485p to 3485p.

Smaller peers Peter Hambro Mining, up almost 13 per cent or 53.2p at 469.75p, and Hochschild Mining, up almost 6 per cent or 11.5p at 207p, were also strong.

The wider commodity sector strengthened, too, with Kazakhmys gaining 15.3 per cent or 46.5p to 349.75p and Vedanta Resources adding 11.4 per cent or 65p to 632.5p.

Overall, hopes that the Feds actions might spark an early recovery in the United States were overshadowed by news from the International Monetary Fund, which said the world economy may contract by as much as 1 per cent this year.

The IMF was also critical of US Treasury Secretary Tim Geithners financial stability plans, prompting concerns about further turmoil.

As a result, the FTSE 100, which touched a session high of 3,912.6, closed with a gain of only 11.9 points at 3,816.9. The FTSE 250, although 69.9 points firmer at 6,261.6, was also off its earlier highs.

Legal & General was the strongest on the benchmark index, swinging to 38.1p, up just over 22 per cent or 6.9p, after better- than-forecast results from Prudential, which was 13.4 per cent or 33.7p stronger at 285.5p, squeezed the bears out of the life insurance sector.

Friends Provident, down 5.3 per cent or 3.3p at 58.5p, missed out on the upswing after Citigroup switched its stance on the stock to hold from buy.

Elsewhere, the banks fared well.