Gandalf's knowledge of Bilbo's ring in The Hobbit doesn't create a Lord of the Rings plot hole. In Peter Jackon's final installment of the Hobbit movie trilogy, The Hobbit Gandalf moment when he confronts Bilbo about his new ring during the pair's farewell at the border of The Shire has created false reports of a Lord of the Rings continuity error. Before their parting, Bilbo makes a humble reference to his outrageously good luck, to which Gandalf scoffs that "magic rings should not be used lightly," revealing he had known all along about Bilbo using the ancient relic on their journey. This might seem curious, as The Fellowship of the Ring sees Gandalf toss the treasure into the fireplace of Bag End, and only then does he confirm that the ring is in fact Sauron's. But if Gandalf knew Bilbo had a ring, and the other Rings of Power belonging to Dwarves, Elves and Men were mostly accounted for, why didn't he realize what the Hobbit had in his possession from the beginning? And if he did know, why not take action at the end of The Hobbit instead of waiting until The Lord of the Rings?

This might seem like an inconsistency at first glance, but answers can be found within wider Tolkien mythology. At the time of The Hobbit, the whereabouts of the Elves' Rings of Power were known to The Hobbit Gandalf character, while the Nine belonged to the Nazgûl and the Seven had either been destroyed by dragons or reclaimed by Sauron. What Jackson's movies don't emphasize is that the Elves also crafted other magic rings that were in no way connected to Sauron. These were far more likely to be picked up by a Hobbit like Bilbo in a dark, wet cave than the fabled One Ring to which Sauron's very existence was tied. It makes sense that when Ian McKellen's Gandalf warns Bilbo about the perils of "magic rings," he simply assumes (or maybe hopes) that Bilbo has picked up one of these less evil creations.

Related: Lord of the Rings: How Old Each Fellowship Member Really Is

Gandalf Figured Out The Ring's Identity Over Time

Bilbo towards the end of the third hobbit movie in his fur coat

Another key reason why this The Hobbit Gandalf moment was true to his character is he wouldn't necessarily know Bilbo's magical ring was the One Ring. It also ties into Saruman's betrayal — something else Gandalf didn't foresee. In The Hobbit, Gandalf is unaware that his fellow wizard is in league with Sauron and Saruman exploits this trust by reassuring his Grey counterpart that the Ring is lost forever. With no reason not to trust the wizard Saruman at this point, it's to be expected that Gandalf wouldn't automatically assume that Bilbo had discovered the actual One Ring.

Despite not knowing for sure, it is clear that Gandalf becomes increasingly suspicious about Bilbo's ring over the years between The Hobbit and The Lord of the Rings. Not only does the wizard begin working with Aragorn to protect the Shire, but he also starts digging into the history of the Ring, trying to trace its movements. Gandalf and Aragorn eventually track down Gollum to find out how much Sauron knows about Bilbo and his "magic ring." It's at this point that Gandalf finally casts the Ring into Frodo's fireplace to confirm his nagging sense of dread. Indeed, in what's widely regarded as the best LOTR movie, The Fellowship of the Ring, Gandalf tells Frodo that his suspicions began the very moment Bilbo chanced upon the Ring in that fateful cave, although he didn't then know why he felt the way he did.

The potential for confusion regarding Gandalf's moment of realization arises due to a slight change Jackson makes to the ending of The Hobbit. In Tolkien's original book, Gandalf's knowledge of Bilbo's ring is vague — the wizard only hints to Bilbo that he knows about the item. Most probably in an attempt to further link The Hobbit to The Lord of the Rings, Gandalf explicitly references the Ring during his farewell to Bilbo on the big screen, which subsequently opens up questions as to why the wizard didn't act sooner.

If Gandalf Knowingly Left The Ring With Bilbo There'll Be A Reason

Gandalf greets Bilbo in The Hobbit

The One Ring has been given more time in the spotlight thanks to the series Rings of Power, which will, at some point, chronicle the forging of the ring. This means there's been increased scrutiny over pre-The Hobbit events and the ring, as well as Gandalf himself (as he may-or-may not be making a Rings of Power appearance). Gandalf is a mysterious wizard and shows seemingly-omnipotent abilities from time to time. Famous enigmatic phrases like "A wizard is never late, he arrives precisely when he means to," only fuel the fire of the many questions around the enigmatic Gandalf, but they also bring a key point forward — if Gandalf knew that Bilbo truly held the One Ring and still left it with him, then he would have had a reason. Wizards possess wisdom beyond mortal understanding within the universe that J.R.R. Tolkien has created, and Jackson's change made it possible Sauron had no clue of the ring's discovery in The Hobbit's finale. It's completely plausible that Gandalf could think of no better place to hide the ring than with an unassuming Hobbit. Though keeping the One Ring with Bilbo in The Hobbit may seem strange, it's probably not so strange to Gandalf and the other wizards. After all, if Gandalf's plans were easily understood by audiences (none of whom possess his mystical-yet-mysterious Istari wisdom) then it wouldn't make for very good storytelling.

More: Why Frodo Had To Leave Middle-earth At The End Of Lord Of The Rings