Update: US president Donald Trump has boosted stock markets after claiming he will announce plans that are 'phenomenal in terms of tax' during a meeting with airline executives.
Trump's comments sparked a rally, reversing an earlier move towards safe havens such as gold, with banks leading the way.
The FTSE 100 closed 40 points, or 0.6% higher at 7,230, with Royal Bank of Scotland (RBS) the biggest riser, up 2.5% at 233.1p, and Barclays (BARC) jumping 2% to 229.6p.
The gold price fell back to $1,232.64 an ounce, snapping a run that has seen the precious metal rise for the previous five days.
(10:56) Gold shines as investors dash to safe havens
Gold has notched up its sixth straight day of gains, taking the price of the precious metal to its highest level since November, as looming political uncertainty spurred a flight to safe havens among investors.
The price of gold rose to $1,241.81 an ounce, as investors sized up the political risk posed by US president Donald Trump and elections in the eurozone.
'As political uncertainty remains a key theme on both sides of the Atlantic investors are taking a shine to gold,' said Fiona Cincotta, market analyst at City Index.
'As the markets navigate through the political fog, a push towards $1,300 by this safe-haven asset is a very real possibility. With elections in France and Germany, Brexit woes and an Italian banking crisis on the cards we would be fools not to consider gold.'
Mark Holman, chief executive of bond investors TwentyFour Asset Management, echoed these fears over the potential for political risk to derail markets trading at all-time highs.
'We think there is a lot of complacency amongst market participants assuming that everything will work just fine,' he said.
The Trump rally had not left much room 'for policy error or execution risk' from the US president while the potential for the far right candidate Marine Le Pen to prevail in French presidential elections also loomed, he said.
'Having heard a few more of her economic plans at the weekend, we are acutely aware of the downside of a Front National victory, with policies such as currency redenomination already being promised,' he added.
Sebastian Lyon, Citywire AA-rated manager of the Trojan fund, said in his latest update to investors that gold remained 'essential portfolio insurance', with 9% of his fund held in the metal.
'The Trump era may bring forward the end of central bank hegemony, as the [president] has been critical about the Federal Reserve and its role in distorting the economy since the financial crisis,' he said. 'If Trump's policies of reflation gain traction, the outcome is likely to be inflationary, which would be positive for gold.'
The FTSE 100 edged nine points higher to 7,197, despite a slump in mining stocks as the copper price fell. Anglo American (AAL) fell 3.2% to £12.88, Antofagasta (ANTO) dropped 2.6% to 815p and Glencore (GLEN) was down 2% at 305.8p.
Smith & Nephew (SN) was also among the fallers, down 2.5% at £11.71 as the artificial hip and knee maker reported a 7% fall in profits, hurt by weak markets in China.
On the FTSE 250, Thomas Cook (TCG) was a big faller, down 8.1% at 84.6p as the travel group cautioned over the impact of political and economic uncertainty.
Ashmore (ASHM) was the biggest riser on the index, up 6.3% at 338.7p as the emerging markets-focused fund manager reported a 32% jump in profits in the first half of its financial year.