The price of gold (in terms of U.S. dollars) went down about 40 dollars today. That is a big move and many, even in the mainstream, are talking about a double-dip recession. It's hard to call it a double-dip for me, since I'm not sure we ever came out of the first one, but regardless, it looks like the economy is continuing to head down.
The price of gold has been up as of late, but it is hard to blame inflation fears as the primary reason. If that were the case, interest rates on longer term bonds would be showing some sign of going up instead of down. There is a lot of fear in the world and gold is being used as a crisis hedge. But the point of all of this is that the gold price may take a hit in the near-term. If the stock market tanks and people get really scared, U.S. dollars will be in high demand. Gold will go down. However, it seems that foreign central banks are putting a floor on the price of gold. If gold goes down enough, don't be surprised if the Chinese central bank makes a big purchase.
Looking a little further out, I don't see how gold cannot go up. Nothing is ever a sure thing, but if gold takes a hit in the near-term, it will create a great buying opportunity. There is massive government debt with no end in sight and the government and Fed will continue to make things worse if we hit another major downturn. The Fed will print more money (figuratively speaking) and we may see another massive "stimulus" package come out of the government. The Fed could also take measures to force the banks to lend their excess reserves. If this happens, prepare for massive inflation (at least double digit price increases).
To sum up, don't be surprised if the price of gold goes down in the near-term with the stock market and the rest of the economy. But it probably won't take long for it to go back up. If the Federal Reserve continues with its destructive policies, look for the gold price to skyrocket, along with your grocery bills.