The 24-year-old winger was in remarkable form for the north Londoners last season, leading to admiring glances from the Spanish giants.
Such is Madrid's interest that they are reportedly willing to break the £80million world-record fee they paid for Manchester United's Cristiano Ronaldo four years ago.
Despite the vast sum on offer and the fact Bale is said to be keen to speak to Madrid, Spurs have remained resolute in their stance that he is not for sale.
The Wales international trained at the club's Enfield complex on Wednesday, when he reportedly told manager Andre Villas-Boas that he wished to leave for the Spanish capital.
Madrid boss Ancelotti was coy about the situation when quizzed ahead of a friendly with Los Angeles Galaxy, but was quick to reject the notion Luka Modric could return to Spurs as part of any deal.
"The squad is very good, as I have said many times there is quality, experience, character and it is young," the Italian said.
"It's hard to talk about Bale as a player of Madrid, let's see what happens. I am very happy with the squad and with the work we are doing.
"I've never talked to Bale because they usually do not talk to players from another team and now we would just talk to him.
"All players are working well, we have not discussed anything about outputs, so it is not true about Modric - he is a player very important to us. Modric will play with us this season.
"The club is talking right now to find a solution to the case of Bale, but there is no news in this regard."
Tottenham may not be keen to sell Bale, but one highly-rated prospect they were willing to part with was England international Steven Caulker.
The 21-year-old academy graduate on Wednesday joined newly-promoted Cardiff for a fee Press Association Sport understands to be £8million - a figure which could soon be used to bring in Valencia striker Roberto Soldado.
The north London club's need for attacking reinforcements is well documented, as is their desire to bring in the 28-year-old Spain international.
Spurs boss Andre Villas-Boas recently confirmed an interest in Soldado, and a deal is believed to be edging ever closer.