Is Gold Too Expensive?

Last week, gold prices hit nearly $1,200/oz. Most people think that this is a bubble and that gold prices are due to drop. I'm really not sure what to make of this, but I feel that in the long run (3-5 years), gold prices will keep going higher. But let me quote someone who's credibility and investing prowess far exceeds my own, Richard Russell, 85-year-old author of the Dow Theory Letters. He said:

There’s still loads of scepticism about the rising price of gold and the bull market in gold. It’s been so long since the US public (since 1971) realized gold was real Constitutional money that they don’t know what to make of the gold action. They think gold near $1,200 an ounce is expensive and they’d rather have dollar bills.

I’ve coined the phrase, ‘dollar-bugs’ for these ignorant Americans. I guess they’ll have to get educated the hard way, which means holding on to their fading Federal Reserve Notes, no matter what. As far as I’m concerned, it’s an amazing example of mass brainwashing. ‘Hey, I’d rather have junk paper turned out by the Fed than the real thing - gold.’ Pathetic. And the happy thought is that you can (legally) still swap your junk fiat paper for gold.

What do you guys think?

If I had to make a recommendation today, I'd rather buy silver than gold - but I'm still holding on to my gold coins right now.