Support for the economy is now likely to turn back to the Federal Reserve and Chairman Ben Bernanke for QE3

The gold price soared to yet another all-time high Wednesday morning, rising $37.09 to $1,640.80 per ounce. The price of gold dipped briefly following the deal to raise the debt ceiling, but quickly bounced back amid concerns that the United States would lose its AAA credit rating. Helping to further boost gold prices was a fresh batch of economic data showing the U.S. economy was slowing materially.

With few fiscal stimulus options likely, support for the economy is now likely to turn back to the Federal Reserve and Chairman Ben Bernanke for QE3. While the Fed’s second round of quantitative easing (QE2) ended in June, calls for QE3 have escalated in recent weeks.

Bernanke and his fellow central bankers undoubtedly paid close attention to Monday’s ISM data, and will be keeping a close eye on Friday’s non-farm payrolls report. The next Federal Open Market Committee (FOMC) meeting will be held next Tuesday August 9 and although most economists and investors do not expect the Fed to launch QE3 at that time, a more dovish tone is expected from the policy statement.

This trend has been reflected in recent weeks by the rising gold price, which is signaling that the Fed is expected to maintain near-zero interest rates for the foreseeable future. In recent weeks, the Fed Fund futures market has pushed out the chances of a rate hike from mid 2012 to 2013. With real interest rates remaining firmly in negative territory for the foreseeable future, the price of gold is likely to remain well supported.