The blue-chip FTSE 100 index closed up by 1.7 percent at 6,498.78 points. The FTSE had fallen after the Swiss National Bank (SNB) decided to scrap its cap on the euro value of the Swiss franc.
Dealers said the SNB's decision had unnerved investors as it raised the possibility of future unanticipated moves by other central banks.
However, the market volatility also drove up the price of gold, a safe haven in times of economic uncertainty, which in turn lifted the shares of gold miners Randgold and Fresnillo.
Randgold was the best-performing FTSE 100 stock in percentage terms, rising 6.4 percent, while Fresnillo advanced 4.8 percent.
"We like Randgold. The Swiss now have 20 percent greater purchasing power which should be good for gold, which is one of their favourite assets," said Gary Paulin, co-founding partner of equity brokerage Aviate Global.
A rebound in energy stocks, as the oil price bounced back from near six-year lows, also helped to lift the FTSE, since mining and energy stocks count for around 20 percent of the index's overall market capitalisation. [O/R]
The FTSE hit a 2014 peak of 6,904.86 points, its highest level since early 2000, but then lost ground towards the end of last year as concerns increased over the weak economic state of the euro zone. Some traders remain cautious in the near term.
"I'd be selling rallies on the market at the moment," said Beaufort Securities sales trader Basil Petrides.
(Additional reporting by Francesco Canepa; Editing by Mark Heinrich)
By Sudip Kar-Gupta
