A weekend of hunting with Porter...

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Two reasons gold could go much higher this year...

Editor's note: Today, our friend and former hedge-fund analyst Paul Mampilly continues his discussion on gold.

 As I (Paul) said yesterday, I believe two things drive gold prices – fear of inflation and fear of additional monetary stimulus.

Today, there is zero fear of inflation. The inflation numbers are so benign that Federal Reserve Chairman Ben Bernanke made fun of people who have warned that the Fed's quantitative easing would cause hyperinflation.

This is also reflected in what speculators in commodities futures markets are doing. According to data from the U.S. Commodity Futures Trading Commission, a government agency, the net long position across 18 U.S.-traded commodities fell 11% earlier this month. This data suggest investors aren't expecting much from wheat, corn, coffee, sugar, and soybean oil.

Why does this matter if you own gold? When you connect the dots, at current gold prices, speculators and investors have fully priced in this "inflation will be benign forever" point of view.

If inflation ticks up this year, gold prices are going to go straight up. And as I said yesterday, there is little downside risk in buying gold today, even if inflation stays low.

 Now let's look at quantitative easing... Last month, the Federal Reserve announced it's going to "taper" the monetary stimulus that it has injected into the banking system since the 2008 financial crisis.

Starting this month, the Fed will purchase $75 billion in bonds each month, down from $85 billion. Why does this matter if you own gold? High interest rates are bad for gold. And this taper is one tiny push in the direction of higher interest rates. But the Fed doesn't plan to taper any more than that for now.

 Unless the economy suddenly booms or busts, the Fed isn't likely to do anything to tighten monetary conditions over the next six to 12 months. That's an "all clear" sign for gold.

Take a look at the following chart... Gold has gone down every time people fear interest rates will go up, because the economy is beginning to show faster growth.

Bottom line: I believe that we have the perfect setup for a huge rally in gold this year. My price target is at least $1,500 an ounce.

– Paul Mampilly

Two reasons gold could go much higher this year...

Yesterday, former hedge-fund analyst Paul Mampilly offered his bullish argument on gold.

In today's Digest Premium, he explains two reasons why gold will stage a massive rally this year...

To continue reading, scroll down or click here. 

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Two reasons gold could go much higher this year...

Yesterday, former hedge-fund analyst Paul Mampilly offered his bullish argument on gold.

In today's Digest Premium, he explains two reasons why gold will stage a massive rally this year...

To subscribe to Digest Premium and receive a free hardback copy of Jim Rogers' latest book, click here.

A weekend of hunting with Porter... It's about gold today... India considers cutting gold taxes... Silver is on the verge of a breakout... The muni-bond market is turning... AB InBev's $5.8 billion acquisition... Your last day to join our focus group...

 Porter and I (Sean) are in Woodbine, Georgia today at one of our favorite hunting lodges in the world, Cabin Bluff. It's a beautiful, 25,000-acre lodge just north of Jacksonville, Florida.

We're here with about 20 members of The Atlas 400 club for a weekend of hunting quail and wild boar. (This is actually our second Atlas trip to Cabin Bluff. You can read about our past experience here.) We look forward to telling you more about our trip next week.

 Everyone is talking about gold today. We've been waiting for the rally, some of us for more than a year. And it looks like it's finally starting...

The spot price of gold jumped around $20 an ounce today to more than $1,260. The Market Vectors Gold Miners Fund (GDX), which holds a basket of mining stocks, was up as much as 4%. The Market Vectors Junior Gold Miners Fund (GDXJ), which holds a basket of junior miners, was up more than 5% as of midday trading.

GDX is up more than 12% in 2014. GDXJ is up more than 20%.

 One reason for today's move higher is news from India, which was the world's largest gold consumer before China overtook the No. 1 spot in 2013. India recently imposed a tax on gold bullion to stem its falling currency, the rupee. We explained the situation in the December 12 Digest...
 

 Some members of the Indian government are asking for the taxes to be eased. If the taxes were cut, we'd see more gold flow into India.

 Meanwhile, silver, gold's cheaper cousin, was up today, too. And S&A Short Report editor Jeff Clark thinks the rally is just getting started. As he wrote in today's Growth Stock Wire...

 Yesterday, we told you about a major announcement Jeff is making on January 25. He thinks we could soon see a repeat of the market destruction of 2008. But remember... that was Jeff's best trading year ever.

To make sure you don't miss the announcement, and to watch a short trailer of Jeff discussing his views for free, click here. (This isn't a promotional video.)

 Regular Digest readers know that Detroit's bankruptcy and Puerto Rico's likely $70 billion default – combined with fiscal problems in California and Illinois – have helped cause a selloff in the municipal-bond market.

We've written plenty about the drop in munis, so we won't focus on it here. You can read the January 14 Digest for the full story.

 Throughout the selloff, Dr. David "Doc" Eifrig still believed in muni bonds. He thought the drop was overblown. Certain municipal-bond funds were trading below their net asset values... and they were paying tax-equivalent yields of 10%.

And now, it looks like the market is catching on. After 34 weeks of investors pulling money out of muni-bond mutual funds, last week saw a net inflow of $103 million, according to data from research firm Lipper.

The truth is, interest rates have stopped rising (for now). Plus, municipal finances are improving... Florida, New York, Minnesota, and Wisconsin have improved enough to start considering tax cuts. And California just found itself with the biggest budget surplus in a decade.

The optimism has brought new life to muni bonds.

 Earlier this month, we talked about Doc's top municipal-bond recommendation. At the time, it traded at a discount of more than 8.5% to the value of its holdings. The market has risen since then. One of Doc's top recommendations is up more than 4% in 2014... But it still yields 6.5% today.

 Anheuser-Busch InBev, the world's largest brewer, recently bought South Korea's Oriental Brewery from private-equity firms Kohlberg Kravis Roberts (KKR) and Affinity Equity Partners for $5.8 billion.

Back in 2009, AB InBev sold Oriental Brewery to KKR for $1.8 billion. Some investors thought the brewer was crazy to pay more than three times what it sold Oriental for four years ago. But Extreme Value editor Dan Ferris disagrees. On Tuesday, he updated subscribers on the situation...

 This is also an example of why private-equity stocks – like True Wealth holding Blackstone Group and Small Stock Specialist holding KKR – are hitting all-time highs... The huge amount of money sloshing around the economy today (and improving economics) are allowing them to sell their assets for huge profits.

 Today is your last chance to sign up for S&A's first-ever focus group.

If you decide to take part in our focus group, we'll give you two things... First, you'll have access to loads of our best research (including back issues) for 30 days. Second, we'll send you a $5 Starbucks gift card. We want to treat you to a cup of coffee while you're reviewing our work.

 So if you'd like 30 days of access to six of our most popular newsletters – including Doc Eifrig's Retirement Millionaire, Porter Stansberry's Investment Advisory, Steve Sjuggerud's True Wealth, and Frank Curzio's Small Stock Specialist – today is your last chance.

And as a special offer, we're also giving you 30 days of access to Dan's Extreme Value (which normally costs $1,000 a year) and Porter's Stansberry International (which isn't even available for sale yet)... all for less than $50.

To sign up for the focus group and gain access to all this research, click here.

 New highs (as of 1/22/14): Alcoa (AA), Advent Claymore Convertible Securities Fund (AVK), ProShares Ultra Biotech Fund (BIB), Blackstone Group (BX), EnerSys (ENS), Energy Transfer Equity (ETE), Gladstone Capital (GLAD), Corning (GLW), iShares Biotech Fund (IBB), Integrated Device Technologies (IDTI), SPDR International Health Care Fund (IRY), Kohlberg Kravis Roberts (KKR), ProShares Ultra KBW Regional Banking Fund (KRU), National Fuel Gas (NFG), Penn Virginia (PVA), Range Resources (RRC), ProShares Ultra Health Care Fund (RXL), Skyworks Solutions (SWKS), Cambria Shareholder Yield Fund (SYLD), United Technologies (UTX), Vanguard Natural Resources (VNR), Vringo (VRNG), and Wells Fargo (WFC).

 More positive feedback on Part I of our annual Report Card. Stay tuned, Part II is coming tomorrow. Send your thoughts to feedback@stansberryresearch.com.

 "What a pleasure to see an honest report card! So many times we see analysts bragging about their one tiny successful recommendation and burying their many unsuccessful ones. When I see how thoroughly and objectively you report on all your publications it just makes me angry that I didn't have someone like you advising me years ago. Again – congratulations on a valuable and honest report." – Paid-up subscriber CR

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