Market Report: Weak dollar has dazzling effect on gold miners

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Shares in gold miners soared to record levels as the price of the precious metal on the commodities market neared 18-year records. Anglo American, which controls the world's No 2 gold producer, AngloGold Ashanti, traded above £16 a share for the first time as brokers foresaw bumper profits from precious metals to add to the ongoing boom in base metals such as copper.

Citigroup slapped a "buy" recommendation on Anglo American shares yesterday, saying its period of under-performance against the sector was at an end and the company now offered investors "hidden value". The stock closed at 1,601p, up 37p on the day.

The gold price peaked at $470 an ounce yesterday, its best level since June 1988. The ongoing weakness of the dollar has made gold an attractive investment, particularly since governments around the globe have eased off on sales of their gold reserves. And fears of inflation have eroded the prospects of making money from fixed-income assets such as bonds. Gold's four-day rally finally came to an end yesterday afternoon in anticipation of the US interest rate decision.

Meanwhile, there were gold stocks at all levels of the stock market hitting new peaks. Randgold Resources, the mid-cap miner with interests in Mali and Ivory Coast, was at 862p, up 5p. And the AIM-listed Greystar Resources hit another new high, up 13p to 393p. The company is developing a gold deposit in north-eastern Colombia and is widely believed to have attracted potential bid interest from one of the giant mining companies that have opened offices in the country in recent years.

The price of oil eased yesterday after Opec, the producers' cartel, agreed to boost output, and BP and Royal Dutch Shell traded modestly lower (down 4p at 661p and down a penny at 1,915p, respectively). The FTSE 100 performance league was topped, though, by Cairn Energy, whose production targets for its oil interests in Rajasthan, India, were once again increased. The shares leapt 95p to a record 2,009p.

The FTSE 100 settled 13.3 points lower at 5,416.4 in what traders described as a "pause for breath" after a run of four positive sessions. The supermarkets led the way down after Tesco's cautious statement about prospects in the UK. The UK's No 1 grocer saw its shares decline by 13p to 313.5p, but J Sainsbury, off 8p at 275.5p, and William Morrison Supermarkets, 4.25p weaker at 178p, suffered almost as badly. Only Somerfield rose, up a ha'penny at 200.25p amid expectations that its advertising campaign could shore up trading ahead of a conclusion to its long-running bid talks.

GlaxoSmithKline shares got a shot in the arm from news that a rival has been banned from selling a children's vaccine in Europe. GSK will boost shipments of its Infanrix vaccine - protecting against six diseases including whooping cough, polio and diphtheria - after Sanofi Aventis had marketing approval for its Hexavac withdrawn. GSK was up 5p to 1,385p, in contrast with its rival AstraZeneca, which fell 31p to 2,606p. The New England Journal of Medicine published a study which found AstraZeneca's fast-growing schizophrenia drug Seroquel was no more effective than a 40-year-old medicine that costs one-tenth of the price.

There were a few other bearish notes being struck. Prudential, the life insurer which is expanding heavily in Asia, nudged 1.5p lower to 506.5p amid concerns over its Taiwanese operations. These have shown only a flat performance in recent results, and Dutch rival ING has come a cropper in the country, saying that guarantees it gave Taiwanese savers on policies before 2001 mean it must boost reserves. One broker noted yesterday that ING's woes could threaten the City's benign view of Prudential's Asian expansion, since it throws into question the quality of financial planning and assumptions by the life insurance industry in the region.

Meanwhile, Tate & Lyle fell 3.75p to 454.5p as Goldman Sachs noted a copycat product that could challenge its no-calorie sweetener, Sucralose. Punch Taverns and Mitchells & Butlers were down amid nerves over their mooted plan to bid for the 2,000-plus pubs currently owned by Spirit Group. M&B shares dipped 1.75p to 374p and Punch took a 0.5p hit, ending at 803.5p.

There was more trading in Premier Farnell shares as a result of a profits warning from electronics distributor Electrocomponents than there was in Electrocomponents itself. Dealers thought the gloomy trading must be affecting everyone in this sector, so Premier Farnell shares fell 6.25p to 154p in heavy volume in anticipation of its own profit warning. Electrocomponents was off 15p at 245p.

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