The chairman of Berkshire Hathaway said gold has no inherent value and investors in it are simply hoping that demand will be greater in the future.

‘What motivates most gold purchasers is their belief that the ranks of the fearful will grow…As "bandwagon" investors join any party, they create their own truth -- for a while,’ said the Sage of Omaha.

Comparing the precious metal’s ascent to internet stocks and houses, he warned that a self-inflating bubble was growing as more investors try to ride the rising prices.

‘But bubbles blown large enough inevitably pop. And then the old proverb is confirmed once again: "What the wise man does in the beginning, the fool does in the end.",’ he said.

By way of comparison he calculated that all of the world’s gold, about 170,000 metric tons, could be melted into a cube that comfortably fitted within a baseball infield and would be worth around $9.6 trillion (£6.06 trillion).

‘For that, we could buy all US cropland, plus 16 Exxon Mobils (the world's most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money,’ he said.

When investors fear currency collapse that rush to gold, a wise move according to Buffet, but he warned that once this fear passes then the demand for gold will collapse.

‘Should Europe get its collective act together and ultimately resolve Europe’s debt crisis, and if central banks desist from currency debasement, then the premise for holding gold evaporates,’ said Michael Derks, chief strategist at the brokerage firm FxPro.

Although if you are determined this is a “new paradigm” in Gold and want to believe all that glitters will make money; Smith & Williamson's Ani Markova expects the gulf between bullion and gold shares to close and believes the price gold has a chance of hitting $2,500.

Markova aired her views before the Bank of England extended its quantitative easing programme by £50 billion today, which analysts believe will continue to be supportive to the gold price as investors seek a shield from inflation.

Marcus Grubb, the managing director of the World Gold Council, underlined the dynamic. 'The move [QE] is just the latest in a series of liquidity-boosting measures undertaken globally in recent months,' Grubb said. 

'As a time-tested store of value which cannot be artificially devalued by policy makers, as well as a proven hedge against inflation, gold has a key role to play in preserving wealth in a world characterised by policy intervention, heightened risk and on-going uncertainty.'

Markova, who runs the Smith & Williamson Global Gold and Resources fund alongside AA-rated Bob Lyon, points out the huge disconnect between the precious metal and gold shares has been as wide only at three points in the past decade, and that this has thrown up a compelling opportunity.

'While the increased cost of developing and operating mines means the price of the commodity is unlikely to slip beneath $1,500, gold shares have never been as heavily discounted and the macroeconomic backdrop could support a rally,' Markova said.

The manager said low interest rates and broadened asset purchase programmes in the UK, US and possibly even Europe could push prices up.

'I am bullish precious metals medium to long term and believe [gold shares] can have a quick rebound,' Markova said.
For me, I would tend to back the views of Warren Buffet.