Siameseparrot, are you inferring that inflation will cause the price of gold to rise?
That might well be the case but there is no perfect correlation. We had a credit fueled property boom in this country for decades where the government got involved with variations of the First Home Buyers Grant (read Home Vendors Boost) which essentially was a form of subsidy to the housing sector and banks. We had inflation and consequently rising consumer prices during this period but people were not flocking to gold to hedge against inflation.
Nor is gold a hedge against deflation although it may do better than other debt based assets or assets that have counter party risk. Evidence of this is that gold takes a hit when the market believes the Euro is going to collapse or there is going to be a sovereign debt default (which would be massively deflationary). People within the Euro or citizens of countries defaulting or potentially leaving the Euro would do well to buy gold as their currency may lose a lot more value relatively speaking.
Gold is a hedge against government. Gold is truly portable wealth that is valued by all cultures and in the event of a currency collapse or economic turmoil where capital controls are usually put in place and its very difficult to get hold of foreign currency, gold allows you to escape and preserve some of your wealth. Keep in mind that the government may try to 'confiscate' your wealth by taxing your gold when you try to convert/spend it. In that event you want to leave the country with your money in your pocket and outside the banking system.
For thousands of years gold has served as money and over the long term it has more or less been a store of value. The Arabs, who were historically nomadic and had a cultural predisposition to PMs, know the value of gold all to well and to this day they favour gold over real estate.
Gold will rise once more when the US bond market bubble collapses and bond offerings go unsold. The ensuing inflation, due to the Fed having to step in and buy all the government paper and keep it rolling over (the real QE to infinity) will play a significant part but more importantly it will likely mean the loss of 'reserve currency' status and global financial collapse. We could be a number of years away from that outcome but it seems inevitable the way things are headed. Just look at what is happening in Asia with Japan and China, among other countries, now agreeing to bypass the US dollar and trade currency directly.
An excellent article written by Martin Armstrong is at:
