We are in a huge bull market in precious metals that — in my opinion — began in 2001. Now here we are in 2009 and gold and silver are in steep uptrends, especially gold. I know there are a lot of people who think they are late to the party and wondering how to get on the train.

I think the real opportunity is in the gold and silver mining stocks. They’re cheap and I’m going to show you why.

However, before I do you should know there are some difficulties in owning the miners. First of all, they don’t trend well — or at least they haven’t yet.

Here’s the gold and silver mining index (XAU):

Sure, it has gone higher. But notice all the nasty, erratic whipsaws along the way. Not fun and tough to trade. It’s even tougher to buy and hold.

Also, the mining stocks are notoriously difficult to analyze from a fundamental perspective. Not only can the costs of mining gold and silver vary from company to company, but there are many factors within the industry affecting profits that are darn near impossible to predict.

And if all of that’s not perplexing enough, you can also get in situations where gold and silver are going higher while the mining stocks are going down. After all, they’re just stocks. And like the stocks of other industries they’re subject to whims of the stock market.

On the other hand, mining stocks can be great investments because they are a leveraged play on gold and silver. The costs of mining gold and silver — even though they vary among companies – are relatively fixed within an individual company. So when the price of gold and silver goes higher, profits can soar at a far greater percentage than the percentage gain in the metals.

So the bottom line is, if you know when to buy them, you can make a lot more money in the miners than you can in the metals themselves. The key is knowing when to buy them.

Fortunately, I’ve learned how to tell when the mining stocks are a good deal and when they’re a bad deal.

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