The price of black gold marched ever closer to the psychological benchmark of £100 a barrel yesterday as a weak US dollar, tight fuel stocks and geopolitical tensions kept markets on edge.

The price of black gold marched ever closer to the psychological benchmark of $100 a barrel yesterday as a weak US dollar, tight fuel stocks and geopolitical tensions kept markets on edge.

In a parallel reaction, gold soared to a new 28-year high as the dollar hit all-time lows on fears for the US economy and the impact of the global credit crunch sent investors scurrying into the yellow precious metal as a safe haven.

The entire gamut of commodities - from oil to gold to wheat - has become a choice target for investment funds to park their cash as the dollar continues to tumble and investors grow anxious after the US Federal Reserve last week indicated that it may stop lowering rates.

Gold struck a record of $821.30 an ounce, its highest level since its all-time record of $850 in January 1980.

The euro also hit a new high, trading at $1.4553, up from $1.4471 on Monday, and sterling moved within a tick of hitting a new 26-year record against the dollar at $2.09.

The new zeniths yesterday also came after bombings in Afghanistan and an attack on a Yemeni oil pipeline, but they were also fed by a US government prediction yesterday that domestic oil inventories will fall further this year as consumption rises.

Oil was already up before news of the blasts in northern Afghanistan that killed 64 people and the attack in Yemen. Severe weather forecasts for the North Sea, expectations that domestic crude supplies fell last week and the weak dollar all contributed to the latest move upward.

While Afghanistan is not a major oil producer, traders nonetheless are sensitive to the possibility that any escalation in the conflict there between US armed forces and Islamic militants could spill over into other countries, disrupting oil supplies out of the Middle East.

The price of crude yesterday climbed as high as $97.07, another new trading record, on the New York Mercantile Exchange, before settling back to $96.70. "We seem to be seeing a tug of war between people taking profits and those coming in to buy into dips, and they are effectively saying we can go past $100," said Mike Wittner, an oil analyst at Societe Generale.

North Sea Brent crude struck its own record of $93.29 a barrel in London after a number of North Sea oil platforms were evacuated in advance of expected severe weather, and then pulled back to $93.26.