2010 was one of the  best years on record for gold and silver – and predictions for gold and silver performance in 2011 are shaping up to be as varied and dynamic as they were back at the end of 2009, when everyone was calling for the gold bubble to burst.

Three Things That Would Kill the Price of Gold

Is it Still Safe to Buy Bullion?

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The very fact that there are a mixed number of bullish versus bearish calls on gold right now is a sufficient reason to not be too worried about jumping in at the top before a crash in gold.

Usually it’s when you start hearing the calls of gold bugs everywhere – at the grocery store checkout stand, the gas station and the food court – that’s when you’d need to think twice about buying.  When everyone’s a bull, and everyone’s still buying, it’s a good time to sell.

That said you can still heed the occasional bull call. Myles Zyblock, strategist at RBC Capital Markets, keeps track of a “bubble index” which measures the real values of historical investment manias (like the Dutch tulip fetish).  According to Zyblock, we’re nowhere near “bubble” levels for gold.

Gold would have to get to $3800/ounce in today’s terms to reach historical bubble levels, Zyblock says.

This is consistent with other well-known claims about gold still not having made back its old 1980 highs.  If you bought gold in 1980, you’re still underwater.

On top of that, gold mining stocks still haven’t caught up to current gold price levels.  Barrick (TSX: ABX) and Goldcorp (TSX: G) are still undervalued, according to many analysts, in relation to today’s gold price.  This suggests the gold bubble, if there will be one, could barely be said to be under way.  In a full-blown bubble (get it?), even gold stocks should be outperforming.

Another point in favor of gold’s breakneck joyride is the fact that the Fed has given no indication they will be stepping on the brakes anytime soon.  The opposite is true, in fact.  Bernanke’s latest and famous 60 Minutes prime time address intimated that there might even be a QE3 if it is confirmed that QE2 has been insufficient for jumpstarting job growth and broader trickle-down stimulus effects.

So by some estimates, gold will continue to cruise until at least June 2011, when it will become much more clear whether the Fed will unleash QE3.

But judging by the continued unraveling of U.S. mortgage markets, which will still be under way in mid-2011 without a doubt, there will be plenty of wind left in bearish arguments, which is of course a boon to gold and silver.

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