Oil was on the cusp of the landmark $100 a barrel level on Wednesday, helping push gold towards a record $850 an ounce as an embattled dollar hit new lows.

Gold surged above $845, approaching a record set in 1980. New York oil futures were at record above $98.

The moves in the markets in the last two weeks have been phenomenal, said Sean Corrigan, chief investment strategist at Diapason Commodities Management.

The market has been driving itself. Have we got here too soon? It's the spin of a coin where we go from here.

The dollar fell broadly on Wednesday, hitting fresh lows against the euro and a basket of other currencies with comments from senior Chinese officials stirred concern its central bank might shift reserves away from the flagging U.S. currency.

Analysts expect further volatility with further dollar falls seen likely, primarily on the back of worries about the long-term impact of the U.S. debt crisis on banks and the wider economy.

Geopolitical issues, particularly in the Middle East over fears of a strike on Iran, are seen pushing up prices of both oil and gold, with money also pouring into energy and commodity markets from investors scared away from equity and debt markets.


There is a flood of money coming into gold at the moment, said Jeremy East, global head of metals trading at Standard Chartered Bank. You can't really stand in the way. There are hundreds of things that are supporting the market.

Silver has followed gold, hitting a 27-year high above $16 an ounce.

Some see gold rising much further in the months to come as investors seek safe haven investments and try to hedge against a falling dollar.

The 1980 gold record of $850 was attributed to high inflation linked to high oil prices after the Iranian revolution and worries after the Soviet invasion of Afghanistan.

After adjusting for inflation, that level was equal to $2,079 at 2006 prices.

The oil price, adjusted for inflation, also remains a little below the $101.70 peak hit in April 1980 after the Iranian revolution.

Copper prices lagged gold and oil on worries that a flagging U.S. economy might cut demand despite ongoing growth in emerging buyer China, which has led to rising metal prices in particular in recent years.

Three-month London copper was quoted at $7,475 per tonne at 6:55 a.m. EST.

Wheat futures on the Chicago Board of Trade were also swept higher by other markets.

Front month December rose 14 cents or 1.8 percent to a high of $8.11 a bushel in electronic trade.

Robusta coffee futures in London rose to new contract highs on Wednesday, boosted by a supply squeeze which has seen prices for the spot November contract climb by more than 30 percent in the last month.

November rose to a new high of $2,490 a tonne, up $55 or 2.3 percent on the day.

(Additional reporting by Nigel Hunt)