FORTUNE -- The first thing I notice on my most recent visit with Warren E. Buffett, who recently turned 80, is how incredible he looks. He would look terrific for 50; for 80, he looks like Charles Atlas. He's modest about it, as he is about everything. "It all works great," he says. "The eyes, the hearing -- everything works great ... which it will until it all falls apart."

The second thing you notice is that he is so smart it curls your hair.

My first question, as I sit there on the couch in his office, is: "What about gold? Is this a classic bubble or what?"

"Look," he says, with his usual confident laugh. "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"

Okay, so gold is not a screaming buy to Buffett. What should a typical upper-middle-class person in the U.S. buy to prepare for retirement?

"Equities," Buffett answers without a moment's hesitation.....

The world’s monetary system is in the process of melting down. We have entered the endgame for the dollar as the dominant reserve currency, but most investors and policy makers are unaware of the implications.

The only questions are how long the denouement of the dollar reserve system will last, and how much more damage will be inflicted by new rounds of quantitative easing or more radical monetary measures to prop up the system.

Whether prolonged or sudden, the transition to a stable monetary system will become possible only when the shortcomings of the status quo become unbearable. Such a transition is, by definition, nonlinear. So central-bank soothsaying based on the extrapolation of historical data and the repetition of conventional wisdom offers no guidance on what lies ahead.

It’s amazing that there is no intelligent discourse among policy leaders on the subject of monetary rot and its implications for the future economic and political landscape. Until there is fundamental monetary reform on an international scale, most economic forecasts aren’t worth the paper on which they are written.

Telltale signs of future trouble aren’t hard to spot. Only a few months ago, Federal Reserve Chairman Ben Bernanke and a chorus of other high-ranking Fed officials were talking about exit strategies from the U.S. central bank’s bloated balance sheet and the financial system’s unprecedented excess liquidity. Now, those same officials are talking about pumping more money into the system to stimulate growth.....

Richard Russell is not only the preeminent expert on Dow Theory, he is one of the most prolific newsletter writers (Dow Theory Letters) and thanks to his epic longevity, will hopefully go one to break records for many years to come. The “Oracle of the Dow” is not omniscient, unfortunately. Otherwise, we mere mortals would simply follow his sage advice to riches.

He was definitely in fine form in the summer of 2000 when he prophesied that “we’re in the first phase of a bear market that could be long, tedious, grinding and very painful. Before it’s over, I believe we’ll see big pools of money moving out of stocks and into cash.”

But since then Russell has had an especially tough time with deciphering the stock market. Especially so these past few years. He was bearish for some time but then in May 2007 Russell switched to the bullish camp and pronounced that “an unprecedented world boom lies ahead.”

It would seem that Russell has basically given up on trying to time the market’s gyrations, writing recently that “the stock market is too unsettled, too questionable, for me or my subscribers to assume an all-out bullish or bearish position.”

But he continues to be an unabashed gold bull. This is the one market he has been pounding the table about for quite a long time and he has been absolutely correct. To my chagrin, it took me far far too long to realize that gold is indeed in a secular gold bull market. And of course, the next thought after that is the dread that it will be soon over.

Russell puts those thoughts to rest writing recently:

If Group of 20 officials want evidence they achieved little in Seoul, it’s the price of gold.

Gold mocked hopes for a solution to global imbalances in recent months, on its way to new highs. With the $1,400 per ounce mark under its belt, gold was shooting for the next milestone: $1,500. Now, commodities, which fell the most in 18 months on Friday, are dissing the G-20 in a different way.

Gold slid to $1,365.50, just days after hitting a record $1,424.30 on Nov. 9. Why? Fears of overheating in China. Hot money is already wreaking havoc with Asian asset prices. The Federal Reserve’s move to pump a further $600 billion into markets means China may raise rates, a specter that spooks investors.

Sadly, the G-20, our recently dubbed protector of the global economic order, proved again it’s not up to the job. Its solution to what ails the world looks too Japanese for comfort: all central-bank liquidity, no economic reform or cooperation.....

In gold's case, it seems much different.

1.There is a steady increase in price over the years and the press reports mostly fact as in: Gold hit a new 30 year high. CNBC might have someone who talks about how extended gold prices are but you don't see a lot of gold bulls on CNBC for the most part. There might be an occassional reference to Peter Schiff who is a big gold bull but otherwise not a lot of 'bubble' inducing speak there.

2. There is no easy financing options for investors- they need to pay with cash to acquire gold for the most part. There are no interest-only loans available or margin accounts like you had for real estate or stock. Gold is mostly cash and carry which doesn't lend itself to massive speculation by individuals.

3. Gold is simply a placeholder in value that has held up for thousands of years. Countries as well as individuals are attracted to holding gold as a hedge. Golds movement is more a sign of weakness in currencies as opposed to strength in the metal itself although increased demand can skew things more on occasion but that shouldn't be construed as a bubble.

Where are the speculators this time?

Anyway, I did a search in the FAQ about what Red text means and didn't find anything so please enlighten me on what red text actually means or refer a link to me. Perhaps it's sarcasm???? Thanks!

I figured I'd hear something back at some point. You have good points above and I'll keep this response much shorter because this shouldn't be construed as a rant. You made a lot of points so I guess I need to answer some below.

I might appear like a cheerleader, but I'm just an investor looking for places to get a greater than market return. When you value gold by the Dow (e.g. 11,181.2/$1353 = 8.26 - which I have referred to many times in this thread and others), you will see that gold is actually pretty cheap based on historic averages. If this is cheer-leading then I guess I'm a cheer-leader then for stating such an obvious fact as this.

So if someone talks about gold being in a bubble, I'm very interested in hearing why they think it's in a bubble. The article referenced was weak because it never conceived the notion that perhaps the FIAT currencies of the world are just showing weakness and gold is remaining constant but inflating because the currencies are getting weaker. After all it's pretty easy to print money when there is no standard for it to be backed against. The U.S. and all major countries went off a gold standard many years ago that prevented them from inflating currencies.

I don't have to write an article to Financial Times to defend my points on this board- are you crazy?

I was simply reviewing one that you posted here that you must have been pretty proud of based on your response now. There are many critics that don't write or produce things that they review/critic so why should I? I never saw Simon Cowell sing or dance in American Idol and he was a pretty good critic of talent. You don't have to produce a car to write a car review so enough said on that request.

The important thing here is being objective and provide worthy points of contention which I added in that earlier post. There are people like Peter Schiff that do a much better job than I could do anyway and I'm in complete agreement with them so why bother writing an article myself?

I'm not sure of the assertions on not rebutting the points of the article either, but I thought I did a good job of summarizing the points I got out of it and they did get refuted. What points did I specifically not refute?

I argued the points I saw from the article and will gladly refute any other points you have that I didn't already do so bring it on please? Remember, my points were:

1. individuals & institutions are buying more and more gold => must be a bubble
2. low interest rates help drive purchases of gold because the borrowing costs are low
3. gold crashed in 1981 and can crash again

Also I just read the IMF link you provided and I'm wondering when it was last updated? It appears to refer to 2001 as the last time the IMF sold gold. So I will retract my IMF point from the earlier post now and assume that the IMF page is indeed current. My source was this: http://www.marketoracle.co.uk/Article21954.html and that refers to August 2010 so one of these sources is wrong. That was a pretty minor point anyway so I don't need to defend it.

So if you have anything you want me to 'clarify' for you that I missed, bring it on and I promise a much quicker response than yours.

But what makes dow/gold some great teller of value?

Gold has gone up +500% in the last decade, which fiat currencies have declined at a comparable rate?

Historically, two-thirds of gold demand comes from the jewelery industry and from countries like India and China. The remaining demand is generated by investors, manufacturing and the dental industry. But over the last four years, gold has staged a spectacular price rise and won many new investors. Everyone from hedge funds to individuals has jumped in, seeing gold as a way to improve portfolio diversification. Today portfolios often allocate 5 per cent or more to gold. A decade ago such an allocation in sound investment circles would have been heresy. Market dynamics have changed too, with investors playing a larger part in what is driving prices higher. Now private investors hold over 30,000 tons of gold, more than the entire holdings of all the central banks on the planet.

The 2010 gold bubble is fuelled by a combination of five main factors:
historically cheap cost of borrowing, a prolonged bull market, early profiteers,
marketing hype and the risk being ignored. Investors claim that the current market high of $1,380 an ounce is not overpriced, but a reflection of global economic uncertainty, high unemployment and a decline in currency values. Gold is acting, as it should, as a hedge.

In early October the Daily Sentiment Index of futures traders indicated that while only 3 per cent were bullish on the US dollar, 95 per cent were bullish on gold. When everyone in the market is on the starboard side of the boat, you should watch out. Despite their human origins, most bubbles are not easily spotted until it is too late. The dotcom bubble took four years to burst; the real estate bubble six. The last speculative gold bubble, in 1980, took four years to implode, while this latest reincarnation is seven years in the making.

Nov. 22 (Bloomberg) -- Gold’s 23 percent surge this year to a record is proving no deterrent to George Soros, John Paulson and Paul Touradji, whose investments signal more gains for the longest winning streak in at least nine decades.

Securities and Exchange Commission filings this month by Soros Fund Management LLC, Paulson & Co. and Touradji Capital Management LP listed investments in gold as their biggest holdings. Exchange-traded products own 2,088 metric tons, equal to nine years of U.S. mine supply, data compiled by Bloomberg show. Precious metals will produce the best commodity returns in the next year, Goldman Sachs Group Inc. said in a Nov. 9 report.

The purchases show how investors are snapping up hard assets as governments and central banks led by the Federal Reserve pump more than $2 trillion into the world financial system. Gold in exchange-traded products, as much as half of which may be held by individual investors according to BlackRock Inc., is equal to more bullion than the official reserves of every country except the U.S., Germany, Italy and France.....

Jan. 20 (Bloomberg) -- Silver prices may retreat as much as 20 percent this year as soaring demand for physical metal signals a “crowded” trade, said Barry James, the chief executive officer of James Investment Research Inc.

Sales of 1-ounce American Eagle silver coins have totaled 4,588,000 in January, heading for a record, according to data from the U.S. Mint. Silver futures in New York rallied 84 percent last year, climbing to a 30-year high of $31.275 an ounce on Jan. 3, as investors sought a haven against financial turmoil.

“The coin sales are an indication of the level of interest in silver,” said James, who oversees $2.4 billion in Xenia, Ohio. “It’s too popular. When the crowd discovers a good deal, it’s usually long over.....”

When and How Gold Will Begin Its Bubble
By Jordan Roy-Byrne Feb 01, 2011 10:15 am
An explanation of the conditions and setup that will facilitate the birth of a bubble and gold going mainstream.

Editor's Note: Jordan Roy-Byrne, CMT (aka 'Trendsman') is the proprietor of Trendsman Research, which provides investment research to private clients and the general public. Trendsman Research authors several newsletters covering trends in stock markets, bonds, commodities, gold, and silver. See more of his content at The Daily Gold

The bull market in gold is in its 12th year (globally it began in 1999) but has yet to exhibit any “bubble-like” conditions. In fact, we still see many people referring to this bull market as “the gold trade,” as if its an aberration that needs to be reversed or corrected. That aside, we know that gold is under-owned as an asset class. The very-well-respected BCA Research estimates that globally only 1% is allocated to gold and that fits with some of the charts that I’ve shown in the past.

Institutional accumulation began in 2009 (e.g. Paulson, Einhorn) and we know that phase lasts at least a few years before a bull market gives birth to a bubble.

Part of the problem for gold has been the solid performance of other asset classes through most of the gold bull market. Stocks performed very well from 2003 to 2007 and from 2009-2010. Commodities performed well from 2001-2002 and in the first half of 2008. If stocks are doing well or if commodities such as oil and agriculture are performing well, it detracts from gold. Gold performs its absolute best when the other asset classes underperform or don’t perform too well.

Let me explain the conditions and setup that will facilitate the birth of a bubble and gold going mainstream.

First, stocks are going to peak in the second quarter of this year and enter a mild cyclical bear market. The chart below details the previous three secular bear markets and the template that each follows. After the mid-point crash (i.e 1907, 1938, 1974, and 2008) the market rallied significantly over the next one to two years. After that rally, stocks went into a mild cyclical bear market for several years.


Click to enlarge

Those periods were associated with rising commodity prices, rising interest rates, and rising inflation. Sounds like history could repeat again.

In the next year there's a good chance that we’ll see stocks and bonds in a bear market, simultaneously for the first time since the late 1970s. It is at that point that hard assets will emerge and mainstream managers will no longer be able to ignore that barbarous relic. This could begin as early as the second quarter of this year or as late as 2012. It is hard to say but we at my firm think it begins somewhere in the middle.

Here is why the backdrop will ultimately support gold and not stocks or bonds.

Economic growth is simply too low and too meager to put any dent into debt to GDP ratios. The economy is recovering but the debt load is growing larger. Two trillion dollars was added to the national debt in fiscal year 2010. The CBO just came out and projected a deficit of $1.5 trillion in fiscal year 2011. This is why monetization will not only continue but it will be more frequent and in larger amounts.

We already see the effects. Inflation is rising and interest rates may be in a new cyclical uptrend. These are the factors and not deflationary conditions, which will cause the next mild bear market and mild recession. We say mild because the private sector was in recession for three years of the last decade. The survivors are better able to handle any current difficulties. In fact, the credit markets and the global economy have improved. After a recession like 2007-2009, there tends to be a slow but arduous period of recovery for the private sector.

Slowing economic growth and a mild recession can give bonds a boost to some degree but it won’t reduce the need for monetization. Remember, from 2004-2007 we had a housing boom, strong global growth and the budget deficit declined. With no housing recovery in sight, the likelihood of higher interest rates and more of the budget devoted to interest expense, the reality is continued monetization. This doesn’t include the potential for bailouts to states and municipalities, which also comprise a part of GDP. No bailouts there and the economy will be affected.

In the early 1980s, we had the ability to raise interest rates and defeat inflation. This time around, there is no realistic hope and no legitimate solution other than a new monetary regime. We all know the economy cannot grow out of this mess. Furthermore, we know that higher rates will only lead to eventual bankruptcy. Debt levels in the US, Japan, and Europe are already too large. Higher interest rates will raise debt service costs and this will eventually lead to default or hyperinflation. Huge government debt wasn’t a problem 30 years ago.

We’ve discussed some macroeconomic factors but now let’s look at the charts so you can visualize the precious metals complex, where it is, and where it is going in the next few years.

Technicals

Below we show the Nasdaq from 1982-1996. Note that the market essentially consolidated from year five to year eight of the bull market. It was from 1991-1993 that the market began its acceleration and then it became obvious in 1995.

Nasdaq 1982 to 1996 Chart
Click to enlarge

We show the Canadian Gold Stocks ETF as it smooths out the currency volatility. The market made a key breakout in 2010, is now retesting that breakout and by the end of the year will be in accelerating mode. The consolidation took place in year six to year 10 of the bull market.

Canadian Gold Stocks ETF chart
Click to enlarge

Our Junior Gold Index has been stronger as the 2006, 2008, and 2010 peaks are slightly higher than each other. However, the look is very similar. The current correction is serving as a retest to the 2010 breakout to new all-time highs.

Junior Gold Index Long Term chart

Our Junior Silver Index shows the breakout quite clearly. This correction is simply a retest of what was a multi-year breakout in a major bull market. This consolidation occurred in year six to year 10 of the bull market.

Junior Silver Index chart

Of course, the godfather of all “breakouts” is the Dow Jones Industrial Average in 1983. While this was a breakout from a 16-year base (and not a four- or five-year base), the process was similar. Breakout, retest, then acceleration for several years.

Dow Jones Industrial Average 1983 chart

Gold itself looks different as it has been leading the rest of the complex the same way it did in 1929-1930 and the 1970s. Note how its acceleration began in late 2005 and then again at the 2008 low. A move beyond channel 4, which halted the recent advance, could engender a stronger acceleration than the one we’ve seen in the last 24 months.

Gold Chart
Click to enlarge

Conclusion

Precious metals have been in a steady bull market for almost 11 years. During most of that time, stocks and bonds have performed reasonably well. Thus, mainstream advisers and managers could avoid precious metals and still generate reasonable returns. An example is 2009-2010. We expect this to change within the next 12 months. Stocks are very likely to enter a mild cyclical bear market while bonds are at risk of a new bear market. Certainly, without the massive monetization by the Federal Reserve, bonds would be in a bear market and rates would be higher.

If and when stocks and bonds enter a bear market, it will be the first time they are in a bear market simultaneously since the 1970s. As the entire precious metals complex continues its upward climb, mainstream pundits and fund managers will be forced to buy in due to the other asset classes (stocks, bonds, real estate) being in bear markets. With a global allocation to gold of only 1%, one can see clearly where things are headed. We are years away from a true bubble, but 2011-2012 could serve as the beginnings of a precious metals bubble as 1994 was for the technology sector.

Our charts show that this present correction is very likely a retest of multi-year breakouts. As we showed with the Nasdaq in the 1990s and the DJIA in the 1980s, markets tend to follow a retest with at least several years of acceleration to the upside.

Whether this retest lasts weeks or months isn’t the point. The point is to be ready for the period that follows.

©2011 Minyanville Media, Inc. All Rights Reserved

Gold is simply going on a trend line like gasoline, home prices, and other commodities.

You can buy a nice suit for an ounce of gold much like you could do in 1970 and also in 1950 for that matter.

The thing really changing is not so much the price of gold, but the value of the dollar in which gold is priced by.

If you look at a historic Dow chart from 1974 to now, you will see the Dow around 100 in 1974, in the 260 range in 1988, and now it is 12,042.

And Silver you portray gold as being in a bubble? What is the Dow then- if that's not a bubble I don't know what else would be. You can look at bond prices the last 10 years and see a similar bubble-like movement in prices.

If you read the last article link I posted, you will have learned that the premise for gold accelerating in value going forward will be do to money managers piling into gold because both stocks and bonds are likely to be bearish. These money managers will jump into gold because it will hold up well and probably appreciate- they will thus be chasing performance. It will be when this happens in full-bore mode that gold will be in a bubble mode. As a result gold will rocket up in price.

I would not consider gold anywhere near a bubble until an ounce of gold is equal to a Dow index. So with today's Dow, gold would have to sell for $12,000 oz to meet this price objective. Alternatively the Dow could drop to 6000 and gold could reach this objective being priced at $6000. The Dow would need to drop to 1200 to reach this criteria today.