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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. Oil prices stalled in their climb toward $100 a barrel after a government report said oil inventories fell less than expected last week while refinery utilization remained flat.A larger than expected drop would most certainly have propelled oil past $100 a barrel for the first time. Gold surged above $845, approaching a record set in 1980. Silver has followed gold, hitting a 27-year high above $16 an ounce. New York oil futures were at record above $98.Crude inventories did fall at the closely-watched New York Mercantile

Exchange delivery terminal in Cushing, Okla., but that did not appear to be enough to propel prices sharply higher. On the other hand 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. “We got kind of a mixed reaction,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. 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.

At the pump, meanwhile, the national average price of a gallon of gas rose 1.9 cents overnight to $3.043, according to AAA and the Oil Price Information Service. Prices are up nearly 29 cents since mid-October and are 85 cents higher than a year ago. The Energy Information Administration predicts gas prices will remain above
$2.90 a gallon for the rest of the year and will set a new record national average of $3.235 a gallon by May. In May 2007, prices peaked at $3.227 a gallon as refiners, faced with a series of unexpected outages, struggled to produce enough gas to meet demand.
Source: AP, Reuters