Gold pricing does not directly reflect the fear or reality of deflation, it reflects the fear of government response to deflation, which is, the uncontrolled printing of all forms of instruments of paper money. In all cases of uncontrolled inflation of paper money, large spikes in real inflation have occurred, without exception. Once uncontrolled inflation begins it is extremely difficult to contain, hence statements about solving unemployment appear as being more important than controlling deficit spending.
“…budget deficits seem to be a necessary condition for a hyperinflation to occur. …(so long as) the growth rate of the public debt is not permanently higher than that of the gross domestic product (NYSEMKT:GDP). …a continuous increase of the stock of money is certainty necessary for an inflationary development. …so long as REAL GDP RISES AT LEAST AS STRONGLY AS THE MONEY SUPPLY.” P. 161 Peter Bernholz
This quote is about inflation in highly industrialized nations, not Zimbabwe. Since the advent of a world-wide pure paper money system, a twentieth century innovation, all uncontrolled deficits funded by the creation of money have ended in large inflationary spikes. Argentina, 1989/90, China 1947/48, Germany 1920/23, Brazil 1989/90 are a few examples of unpleasant ends to the uncontrolled printing of money to solve deficit spending. All ended in disaster. Ask yourself: Is REAL GDP rising at least as fast as the money supply? I believe the answer is: No.
This is what gold is signaling. Deflation rhetoric is a false smoke screen, in this case used to print money products and exotic instruments. Which, I believe is what got us into this crisis in the first place.