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The gold bugs are having a summer picnic and everybody's invited.

Surging oil prices and a drooping dollar have pushed gold prices up 5% over the past month to more than $440 an ounce. The big move has precious metals investors atwitter with expectations that the shiny metal finally may be revving up for a big run past $500.

Of course, gold devotees have seen a number of false starts since last fall, marked by a series of so-called lower highs. But with oil now growing comfortable in the low-$60 per barrel range, it's getting harder and harder not to see inflation -- a gold bug's best friend -- in the economy, even if it is not showing up in the economic data.

checked in with Shanquan Li, portfolio manager for the $350 million

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Oppenheimer Gold & Special Minerals fund, to get his read on whether this summer's gold rally can last.

It has been a golden summer for gold investors. Which way is gold headed from here?

A continued rally in gold prices depends on two things: the dollar and oil. If the dollar continues to weaken, as it has been doing lately, and oil prices keep heading higher, as they have been doing, then the implication is that inflation is on the way. That's why gold has been popular lately. It's a great two-way hedge against the dollar and against inflation.

Is gold directly linked to oil?

In the last year, oil and gold have been highly correlated. But the longer history, let's say 10 years, it's quite different. Sometimes it has been correlated and sometimes not. That's because it's a different supply/demand story.

You mentioned buying gold as a hedge against inflation, but the official economic data keep showing that there is no serious inflation problem. What gives?

This point has been very controversial. First of all, inflation is often delayed. Very often people don't realize inflation has arrived until they see it in the data. And by then it is too late.

Also, there is a big argument about the validity of the CPI and PPI. Many economists feel the baskets they track are outdated. Clearly, not only fuel has moved up in price, but health care and education have moved up significantly and it's not truly reflected in the indexes. On the other hand, cheap imported products from China are being weighed too heavily, which skews the data.

Technically speaking, when gold has rallied this year, it has been setting lower highs before pulling back. Is this another head fake?

Gold is a very niche market. It's narrow. So that makes it volatile. So many factors influence gold, like the dollar and inflation, that it makes it very difficult to judge technically.

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So what is the best way to play gold stocks?

It depends on your investment profile. In general, investors should not try and daytrade gold. It's too volatile. But they should put 5% to 10% into precious metals as a hedge just in case everything else goes wrong.

If gold is the asset of last resort, it did not seem to move too much after the London bombings. Is it still a safety haven?

I think geopolitical problems have become a weaker factor in moving gold prices. That's because events like the London bombing are localized. They may have made Londoners scared, but it was not a world war situation where several countries are involved. The more countries that are involved, the more it will move gold prices.

Most mining companies are headquartered in Canada, South Africa, Australia and the U.S. Is one country better than another when it comes to extracting gold?

It depends more on the management of the company than the individual countries. The whole point is to extract the gold at the lowest cost possible. It's a project-by-project determination.

In general, however, I think that North America is better than elsewhere. There are not too many names to buy in Australia, and South Africa has a lot of labor troubles. It's getting tougher over there. North America is the most stable. Latin America has been looking better as well. Down the road, I expect Chinese and Russian miners to come on strong.

What are your top picks?

There are very few true growth companies in the gold sector. However, I think one company with a lot of potential to grow is

Glamis Gold

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. They have several great properties in North and South America and have a management team that understands efficiency. They also have a strong pipeline and reserves.

I also like

Newmont Mining

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, which is my largest holding in the fund. They are a very well diversified company with great properties in many locations. From a geopolitical point of view, they are diversified. Plus, Newmont has a history of being sophisticated when it comes to technology.