I think gold actually does better in deflationary times. RIght now with energy, farm commodities etc dropping rapidly (I assume wages to follow) I think we are more likely to look at deflation instead of inflation. As far as supply and demand in the use of gold, the loss of jobs etc will quite possibly reduce the use of gold I think. I don't know if there are any major supply changes as far as supply goes.

Many say that national treasuries are artificially supressing gold prices. I have some doubts, but if you believe that, then for gold to go significantly higher, you must have those treasuries either change policy, or run out of ability to interfere. I still haven't heard a real good explaination of why governments would spend a lot of time and effort depressing the POG.