Perhaps the way to look at the deflation / inflation story is compare it to filling a glass of water. The glass is currently being filled to avoid deflation. Massive amounts of US dollars are being issued in the form of debt by the USA for its domestic needs ie to fill the hole created by overleveraging the Banks and the resulting derivative losses and by consumer bad loan on housing and credit cards. The USA is also issuing Dollars to UK EUROPE ASIA.
The UK EUROPE and ASIA are also issuing their own debt in the form of bailouts of Billions of Pound Euro Yuan etc.
Eventualy the glass is filled and deflation is negated. However what tends to happen is that the glass is filled too much and there is over flow. It is filled to over flow to make sure deflation is killed. The over flow leads to inflation because too much money has been used. It is this inflation scenario that drives the gold price up.
The real problem this time is that controlling the money supply is too dificult because there are too many players issuing money ie USA UK Europe ASIA AUSTRALIA ETC.
