Britain's FTSE forges ahead as gold miners glitter

* FTSE 100 up 1.1 percent

* Randgold, Fresnillo (Other OTC: FNLPF - news) lifted by rise in gold price

* Meggitt (Other OTC: MEGGF - news) tumbles after profit warning

* Lloyds down on further customer compensation charge

By Sudip Kar-Gupta

LONDON Oct 28 (Reuters) - Britain's top equity index headed back towards two-month highs reached at the end of last week, lifted by gains in gold mining companies' stocks, BT and GlaxoSmithKline (Other OTC: GLAXF - news) , which rose after posting better-than-expected earnings.

Many investors were focusing on a U.S (Other OTC: UBGXF - news) . decision on interest rates due at 1800 GMT.

The U.S. Federal Reserve is expected to keep rates on hold when its two-day policy meeting concludes, and it may struggle to convince investors it can tighten monetary policy before the end of 2015 in the face of U.S. and global economic headwinds.

Nevertheless, expectations that rates would not be increased this year lifted the price of gold and, in turn, gold miners such as Fresnillo and Randgold, which rose 4.6 percent and 3.8 percent respectively.

Higher interest rates can dent the appeal of gold, which is a non-interest bearing asset, as it would lift the interest gained on dollar assets.

Randgold and Fresnillo were the best-performing stocks on the blue-chip FTSE 100 index, which climbed 1.1 percent to 6,437.80 points, close to its highest level in two months.

"Randgold and Fresnillo are just tracking the gold price higher," XTB Limited director Joshua Raymond said. "There's a lot of appetite to buy into this market."

Communications services company BT rose 3.3 percent after the British Competition & Markets Authority provisionally cleared its deal to buy mobile operator EE .

However, engineering group Meggitt slumped 20.5 percent afer a profit warning due to a downturn in its military division that compounded an already poor performance from its energy unit.

Lloyds also fell 4.4 percent after reporting weaker-than-expected results and setting aside another 500 million pound ($765 million) charge to compensate customers who were mis-sold loan insurance. That takes its total bill to 13.9 billion pounds, more than double any other bank's.

The FTSE 100 remains down by about 2 percent since the start of 2015 and some 10 percent below a record high of 7,123 points reached in April (LSE: 0N69.L - news) , partly due to a slowdown in China which has affected world stock markets. (Additional reporting by Kit Rees; Editing by Louise Ireland)