Fundamentally, I’ve thought gold has had a great story for many months.  After all, there are only so many billions of dollars that governments can spend and use for bailouts, and there’s only so much money the world’s various central banks can print, before investors begin putting their money into hard assets instead of paper currencies.  Heck, I’m no deficit hawk, but projections of trillion-dollar deficits in the U.S. alone for the next few years do not spark confidence in the Greenback.  Many other countries are in the same boat.

But gold prices really didn’t budge much during last year’s financial tsunami or during the first half of this year.  Interestingly, gold stocks made a couple of breakout attempts (one in March, the other in May), but both failed relatively quickly.  That only served to dampen spirits as investors moved elsewhere.

However, gold and gold stocks broke out in a very powerful way two weeks ago, and their action since then tells me the breakout will stick, and much higher prices are likely.  While everyone focuses on the $1,000 per ounce gold level, I think the breakout has already occurred.

Just to give you an idea of how powerful the breakout has been, the smallest volume that the Market Vectors Gold Miners Fund (symbol GDX) traded in the first 10 trading days from its breakout was 68% above average.  Volume on the breakout day was 221% above average, and the follow-through the next day was an amazing 298% greater than the norm.  That’s some real buying!

Interestingly, gold bullion had a similarly long base from May 2006 through August 2007.  When the breakout came, it resulted in a 51% move into March 2009.

Given the long base and the big breakout, I think you can buy some gold.  But how should you play it?  There are three options.

One is to buy gold itself via the SPDR Gold Trust Fund (GLD).  It will move with the price of gold each day.  Chances are GLD will be a slower mover, especially if the overall stock market remains in a bullish mode.  But it will also be safer and easier to hold, with less pronounced pullbacks.

If you want to own a faster-moving position in gold bullion, consider the PowerShares Double Gold Fund (DGP).  Like many leveraged ETFs, it’s not a great long-term (multi-year) investment, but if gold bullion is going to run, DGP will move twice as quickly on the upside.

The second option is to buy the aforementioned Market Vectors Gold Miners Fund (GDX), which owns a bunch of gold mining companies.  If gold is going to rise, gold stocks should outperform the metal, and thus far, they have.  However, be prepared for volatility.

Third, you can buy an individual stock, thinking that you can own the leader.  Agnico-Eagle Mines (AEM), Goldcorp (GG), Iamgold (IAG) and Gold Fields (GFI) are four to consider.  This path is riskier, as you’ll be exposed to potential company-specific problems, but it also has benefits.

Whatever way you choose, I think getting some exposure to gold–hopefully on pullbacks–could produce some good-sized profits in the months ahead.