The cost of gold mining around the world has gone up due to global growth/inflation. This was recently identified in a presentation I saw given by Newmont Mining. The US Federal Reserve has recently shifted it's focus from inflation fighting to one that's focused on maintaining growth and jobs. This shift in focus has delt a powerful decline in the global value of the dollar in relation to other currency around the world.

To answer your question on gold as a hedge against inflation, all commodities right now are good hedges against inflation. Short term gold is getting a little overdone. Usually, when you see headlines in the WSJ or the NY Times about gold running up it's a good signal to either take profits or short the subject in focus. The strength of Gold running from 680-750 in such short order has been shocking. If you are looking for a commodity to hedge against inflation I would suggest owning Natural Gas on a short term (12-24 months) basis. Natural gas is very volatile, but has not run up like oil, gold, silver, or any of the agricultural commodities. The Democrats gaining control of the White House in 2008 would also be Bullish for natural gas as it's looked upon as a cleaner alternative to coal.

In my opinion those buying gold up at these lofty levels are due to get hurt financially. It seems way overbought at $750. If your looking for an entry point I would look at a retracement to the $680 level. The ETF that tracks natural gas in ticker UNG. If you don't mind waiting, Hurricane season ends late October early November, baring another Katrina/Rita natural gas will be on selling sub $6 going into this winter. Commodity cycles usually last 10-15 yrs (1906-1923, 1933-1955, 1968-1982). Using 1999 as our starting point it looks like we're about half way into this one.

I have been buying stock ticker GLD since it opened on the market in 2005. GLD which is a gold ETF, is unique in that it not only tracks the current Nymex spot price of gold, but the trust actually holds physical bullion. I have sold over half of my initial position within the last month.

Looking at past federal reserve rate cut cycles, it is noteworthy that when growth picks up from the Fed cuts, the dollar will snap back or firm up in value. Another factor pushing gold higher is the Japanese Yen. The Yen has been used as a revolving door for credit as their prime rate has been 0-1% for some time. I believe this has been used to hyper inflate the price of commodities. When the Yen starts to appreciate in value in relation to the dollar or the Euro the Yen becomes less attractive to global investors using it to leverage themselves into commodity plays. This particular investing strategy has been termed the "Yen carry trade" when this strategy starts to unwind all the hyper inflated commodities will unwind in short order.

In other words, if your holding gold or gold based ETF's keep an eye on things.. "look out below!!!".

I hold 5% of my portfolio in speculative stocks. One in particular that I like is a junior mining company called Goldenstar resources. They're a junior mining company that has production mines in South America (Peru Chile)and Ghana, South Africa.

Newmont mining revealed this week that they have been hedging their current gold reserves at a 20-30% discount to the front month price which as you stated is at $750. Newmont also stated that for the first time in their history they have decreasing reserves of gold and the costs related to getting the gold out of the ground has been rising at a fast rate.

My point is goldenstar is 0% hedged and all gold sold will be sold at the front month price, their current reserves sit at 4.15 million oz. The CFO of Goldenstar formerly worked at Newmont and the companies have a joint partnership over a power-plant in Ghana.

I think they will be bought out at a premium and soon, most likely by Newmont Ticker GSS.

A good source for gold related information on the Internet is Jim Sinclair.

Good luck!