There was something of a golden glow about the markets yesterday. It was not only because the precious metal hit another record high but also because the FTSE 100 leapt 2 per cent, heading towards its highest level this year. It closed at 5,355.50 points, up 104.09.

Gold was buoyed by a weaker US dollar and the FTSE was boosted by higher commodity prices and renewed optimism about the American housing market. New data showed a 10.1 per cent rise in home sales during October, better than expected, to the highest level in 2½ years.

As gold passed $1,167 yesterday afternoon, and amid higher metals prices generally (copper was trading at a 14-month high), miners were in fashion. Kazakhmys rose 54p to £13.20, Rio Tinto rose 117p to £32.65 and Randgold Resources climbed 170p to £51.20.

A weaker dollar also increased the attractiveness of oil, which rose above $79 a barrel. BP rose 9.7p to 588.7p and Royal Dutch Shell ended the day up 44p at £18.69½.

The banking sector was upbeat, with Lloyds Banking Group rising 3.32p to 91.47p after receiving strong support for its debt-swapping plans. Barclays gained 10.2p to 314½p amid reports it had restarted talks over selling its private equity unit. Royal Bank of Scotland rose 1.8p to 37.8p.

Cadbury hit a new high, adding 13½p to 814p, amid speculation of a bidding war for the confectionery group, with Hershey and Nestlé the latest names to be linked.

Experian rose 12½p to 586p after the credit checker revealed a joint venture with seven of India’s top financial services groups.

Rentokil Initial rose 1.6p to 102.4p after an upbeat note from Panmure Gordon, which said that it thought the pest control-to-parcel delivery group could continue to outperform expectations based on cost-saving initiatives alone. G4S ticked up 0.1p to 243.8p after the security group said that it would buy All Star, a US Government-focused facilities management business, for $59.9 million (£36 million).

Petrofac, the oil services group, became the biggest of only five blue-chip fallers, closing down 12½p at 998½p as investors took profits.

In the FTSE 250, Robert Wiseman Dairies rose 17.9p to 489.2p after Numis said that the recent sale of a 5.7 per cent stake in the group by First Milk cleared the way for other potential bidders. First Milk retains a near-10 per cent stake in the group but Numis said that a further share sale was possible.

HMV rose ½p to 113½p amid hopes that it could benefit from problems at Borders UK, its rival. Seymour Pierce said that HMV’s Waterstones division could pick up £30 million to £40 million of additional sales over the next year if Borders went into administration. WH Smith, which is said to have walked away from buying Borders, rose 4½p to 533p.

Heritage Oil slid 23.8p to 483.7p after the oil explorer pulled out of a planned merger with Genel Energy, of Turkey, to sell its Ugandan interests to Eni, of Italy, for up to $1.5 billion.

• New York: Dollar weakness boosted energy companies and encouraging housing data reassured investors. At the close the Dow Jones industrial average was up 132.79 points at 10,450.95.

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