[Mithadan]

This topic is interesting and may not have been discussed here before. I looked at the Chapter by Chapter thread for The Shadow of the Past and though that discussion ran for three pages, this specific question was not mentioned.

Let's break this down a bit. Gandalf tells Frodo that it was apparent to him from the first that Bilbo's ring was one of the Great Rings. As Huinesoron mentions, Gandalf discussed with Elrond, around TA 2851, ninety years before Bilbo finds the Ring, that all of the Great Rings had been accounted for except for the One. If Bilbo's ring was clearly a Great Ring and Gandalf knew this immediately, he should have surmised that the One had been found. Shouldn't action have been taken then?

Let's look at the possible explanations for this.

1. Gandalf did not know for certain that Sauron had gathered all of the Seven that had survived AND that the remainder had been destroyed. Gandalf actually believed that Bilbo's ring may have been one of the Seven. This requires that he have forgotten or not heard Saruman explaining that only the One had no stone (and when did this conversation take place?). However, Gandalf states his belief that it is perilous for a mortal to possess any of the Great Rings. Why would he not intervene even if he thought it was one of the Seven?

2. Gandalf did not immediately believe that Bilbo's ring was one of the Great Rings and came to suspect this later, perhaps during the Long Expected Party. In other words, Gandalf lied (or exaggerated), and initially thought the ring was one of the "lesser rings" (but he says he feels even those "essays in the craft" are dangerous for mortals).

3. JRRT made a minor error of continuity that cannot clearly be reconciled.

Thoughts? Other options?