LONDON (AFP) - Gold hit a fresh record above 1,296 dollars on Wednesday, as the dollar sank after the US Federal Reserve hinted at more stimulus spending if the tepid US economic recovery cools further. The precious metal surged as high as 1,296.30 dollars an ounce in afternoon trade on the London Bullion Market, extending its record-breaking run. On the back of golds run higher, sister metal silver struck the highest levels for two and a half years, at 21.15 dollars an ounce. A combination of a weakening dollar and the Federal Reserve indicating it may loosen monetary policy further is pushing gold to record highs, ETX Capital senior trader Manoj Ladwa told AFP. While some are calling for it to run out of steam around the 1,300-dollar level, the momentum still clearly remains to the upside. The Federal Reserve said Tuesday that it was prepared to take new stimulus measures if necessary to keep the US economy on track while leaving interest rates at record lows. The news sent the dollar reeling against the euro and the yen. A weak dollar stimulates demand for dollar-priced gold, which becomes cheaper for buyers using stronger currencies. In turn, that tends to push prices higher. CMC Markets analyst Michael Hewson predicted that gold could reach 1,300 dollars soon. Perceptions that the Fed will look to further ease monetary policy into year-end will underpin gold and help push it above 1,300 dollars as investors seek better stores of value, Hewson said. He added: The next target looks set to be 1,300 dollars, and given the fact that demand is set to remain pretty robust a move towards 1,500 dollars by the end of the year is by no means out of the question.