At last month's World Economic Forum in Davos, speculator George Soros opined that gold has become the "ultimate bubble." For someone who termed the run-up in credit a "super-bubble," that isn't faint praise. Meanwhile, the latest data suggest that central banks worldwide were net buyers of gold in 2009 for the first time in over 20 years. Should central bankers be listening to the warning from the master speculator?

The speculator who cried "bubble"
The story is a bit more complicated than that. It turns out that Soros' investment fund, Soros Fund Management, was also a heavy buyer of gold in 2009. In the fourth quarter alone, the fund raised its holding of the SPDR Gold Shares ETF (NYSE: GLD) from 2.5 million to 6.2 million shares (value at quarter's end: $663 million). The fund also acquired 11,000 call options on the ETF, which gives it the right to buy an additional 1.1 million shares. The SPDR Gold Shares ETF, which is backed by physical bullion, has become very popular with individual and institutional investors alike.

The fund also added to positions in gold miners Kinross Gold (NYSE: KGC), Yamana Gold (NYSE: AUY), Barrick Gold (NYSE: ABX), and Freeport-McMoRan (NYSE: FCX).

What's going on here? Has Soros closed out his gold position since the end of last year after realizing he was buying into a bubble? That's highly improbable, in my opinion. More likely, the canny speculator has spotted what he believes is a bubble and he wants to be part of it.

Are central bankers the "greater fools"?
In fact, perhaps Soros considers that continued buying by central banks (and other investors) will make them just the sort of "greater fool" he will require to realize profits on this speculation. As a Societe Generale strategist quipped in a November 2009 research note on gold, "central banks aren't known for their investing acumen." After all, they were net sellers of gold between 2000 and 2008, during which period the price of gold better than tripled.

In my opinion, gold is not in bubble territory yet or, if so, it is in the very early stages. Perhaps that's what Soros is betting on. For investors who are looking for inflation protection, there are more straightforward options. Soros' list of holdings provides some ideas: Two of his largest holdings are pharmaceuticals giant Pfizer (NYSE: PFE) and Brazilian oil major Petrobras (NYSE: PBR).

The Fed is creating a new set of risks for investors, but gold isn't the only way to hedge these risks. Tim Hanson explains why it's time to get out now!

If you're concerned about the threat of inflaton -- and other risks facing the economy -- focus on companies with sustainable dividend growth. The team at Motley Fool Income Investor can show you how to build -- and manage -- a portfolio of high-quality company stocks with robust dividend yield. To find out their six Buy First stocks, take advantage of a 30-day free trial today.

Fool contributor Alex Dumortier loves macro-themed investing; you can follow him on Twitter. He has no beneficial interest in any of the stocks mentioned in this article. Pfizer is a Motley Fool Inside Value pick. Petroleo Brasileiro is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletters today, free for 30 days. Motley Fool has a disclosure policy.