I heard some folks claming that gold does well under deflation. gold has been 'allowed' to float since 70's, we haven't had deflation to see its performance. The price of gold in terms of Yen TANKED during the 90's(that is, all the yen printing failed to devalue to the yen significantly), you would be better off keeping cash yen in a too big to fail bank even if it yielded nothing
To assume gold does wel in times of deflation on a global scale one must assume the decoupling of gold and cash during the seventies doesnt influence gold it's perception as being money still. I's a bet on human psychology.
Deflation is when everyone is getting pay cuts. CHECK Deflation is when those who still have jobs are in fear of losing them. CHECK Deflation is when revenues are dropping. CHECK Deflation is when prices are dropping because nobody wants to buy or can buy. CHECK Gold sure did better than stocks. Under the deflation from the past year gold was up 5% while everything else was down. This was contrary to the prognosticators who said that gold would drop in deflation. I think what went wrong with the theory is that the dollars we are measuring in are completely unstable.
Well, duh. Everything is relative, to purchasing power, that is. If gold stays at the same price in nominal terms, but that nominal price has more purchasing power, well, that's what it's all about.