ALL that glisters is not gold, but that does not mean that gold does not glister. In fact, as metals and other commodities prices soar, the outlook for gold looks as shiny as it has been for 15 years.

That bodes well for a host of mining stocks, especially AIM- listed Peter Hambro Mining and Highland Gold, according to John Meyer, analyst at Numis Securities.

World supply was down 7% in the first half of the year because of problems in Indonesia and mine closures in Australia and the US, industry consultant Gold Fields Mineral Services says. Although output should recover in the second half, GFMS still forecasts 2004 output will be 3.6% down on 2003.

With jewellery demand picking up and central bank sales declining, the consultancy expects gold prices to rally later in the year and says they may test 15-year highs by early 2005. Numis rates Peter Hambro a buy, with a target of 715p. Highland Gold is around fair value already, but could move higher in a strong gold market, said Meyer.

Other beneficiaries of rising gold prices include Frontier Mining, Celtic Resources, Avocet Mining, Trans-Siberian Gold and Oxus Gold.

The big boys, BHP Billiton and Rio Tinto would also benefit. Both blue-chip stocks are set to do well out of commodity price strength in other areas. Copper, for instance, costs roughly double what it did a year ago and mining firms are turning in record profits - way ahead of market forecasts six months ago and significantly better than analysts were expecting as recently as the early summer, prompting several analysts to make upbeat comments about the sector in recent days.

Merger speculation may continue to underpin selected banking stocks. Now that Banco Santander seems to be free to continue with its purchase of Abbey National, after HBOS decided not to bid, the market is likely to turn its attention to smaller banks, such as Alliance Leicester and Bradford Bingley, as it tries to second- guess the next consolidation story.

A Reuters poll suggests the FTSE 100 will end the year on a positive note - almost 4% higher than where it was at the start of the year. Strong earnings and the growing belief interest rate rises are coming to an end are expected to push the blue-chip index to 4650 by the end of 2004, according to Reuters, which came up with the figure by taking the median of 23 forecasts.

The media group said strategists believe the UK stock market may outperform many other national indices, including the Dow. Not only does the FTSE have a hefty ballast of oil stocks, but the UK market is less sensitive than its US counterpart to rising oil prices.