Below is an excerpt from a commentary originally posted at www.speculative-investor.com on 14th June 2012.

We discussed Warren Buffett's illogical opinions about gold in our 15th February 2012 report under the heading "Buffett's Blind Spot". Today we are going to take a quick look at Buffett's personal war against gold from a different angle and arrive at conclusions that might surprise you.

Some gold bulls have cited the performance of Berkshire Hathaway (NYSE: BRK/B) relative to gold as proof of Buffett's cluelessness about gold. They have underlined their point using charts such as the one displayed below.

A chart like this says that it was right to be bullish on gold versus BRK ten years ago, but what does it say right now? After all, didn't eager participants in the NASDAQ bubble use similar charts/reasoning in 1999-2000 to 'prove' that Buffett was out of touch?

With regard to the correct positioning right now, the chart says either nothing at all or that BRK is now cheap relative to gold and will likely outperform in the future. What it absolutely does not say is that this is a good time to favour gold over BRK.

In general terms, great past performance by any investment is NEVER a good reason to buy that investment in the present. It could, however, be a good reason to sell. Additionally, when bears cite a long-term historical decline or bulls cite a long-term historical rise to justify their current stance, a major trend reversal could be just around the next corner. Always keep in mind that the last cycle's big loser stands a good chance of being the next cycle's big winner, and that one of the surest ways to generate bad investment performance is to apply during the current cycle the approach that worked the best during the preceding cycle.

Further to the above, we confess that when we see gold bulls citing gold's terrific past performance against Buffett's BRK or against anything else as a reason to be bullish on gold today, our inner contrarian gets a little nervous. It's almost a 180-degree turn from the late-1990s and early-2000s when many commentators would cite gold's lousy 20-year record as a reason to be bearish about the metal's future prospects. It didn't occur to them that lousy performance over the preceding 20 years was a large part of what made gold a wonderful long-term investment opportunity in the present. And it doesn't seem to occur to many gold bulls today that great performance over the past 10 years is, if anything, a reason to be circumspect when considering gold's likely future performance.

In addition to the BRK/gold comparison displayed above, we've looked at many long-term charts showing how gold has performed relative to other items. For example, we've looked at charts showing how gold has performed relative to industrial and agricultural commodities, stock market indices, houses, and the average hourly earnings of the labour force. These charts all suggest that on a scale that goes from dirt cheap at the far left to incredibly expensive at the far right, gold is now well to the right of centre. Thanks to a long period of substantial relative strength, gold is not the value proposition it once was.

That being said, there is no evidence that gold's long-term bull market has gone through a mania phase characterised by massive enthusiasm on the part of the general public. It seems to us that the public has dipped its toe into the gold pool, but hasn't yet jumped in.

It would be extremely unusual and perhaps even unprecedented for a long-term bull market in an investment to end before the general public fell in love with that investment, so gold is probably going to become a lot more expensive over the years ahead. This is especially so considering that the monetary and fiscal recklessness that is driving the bull market shows no sign of abating. However, don't be fooled into believing that gold is still cheap.

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