Dear Smart Profits Report Reader,

No surprise from the Federal Reserve yesterday afternoon.

Well, not really.

Bernanke & Co. did as everyone expected them to do and slashed U.S. interest rates. But it was the size of the cut - from 1% to a record low of 0.25% that caught some folks off guard.

You shouldn’t be one of them - at least not if you took our advice to buy gold stocks, as we’ve suggested for some time now.

If so, you’ve likely enjoyed double- and triple-digit returns since September. And there’s more to come for gold. But be careful. The price of gold and gold shares will not move up in a straight line. Here’s why…

Massive Stimulus = Three Huge Rallies In The Next 12 Months

Over the next few months, the talk will be of deflation, not inflation. Actually, what people should be talking about is “disinflation.” That means the slower growth in prices, not necessarily the technical definition of deflation, which is when prices actually fall and are expected to fall further.

Monetary policy does not have immediate effects. But the Fed’s new policy to buy any and all securities by way of its massive balance sheet should act as a major stimulus to the market by mid-summer.

Add to this a massive stimulus package, which will be announced on January 21, as soon as President-elect Obama is behind the desk at the Oval Office… and you have the makings for three major rally points in the coming 12 months.

Rally #1: Gold and silver

Rally #2: Commodities

Rally #3: Financial and insurance stocks

Let’s see why…

Gold

Gold will rally because of the very simple fact that the Fed and governments around the world cannot print so much money without debasing their respective currencies.

This is not idle conjecture. It will happen.

Paper is infinite… gold is not. And the balance could send gold - and gold shares - to the moon in coming years.

What should you do?

Wait for the inevitable pullbacks in gold and gold shares to load up.