When people get gold, they tend to keep it! Nobody floods markets with gold!
Producing gold didn't work like todays note printing press when Central Banks print money without worrying about production counterpart...!
After they discovered New World's gold, spanish did piled it up! and that was their mistake! They should've used it in improving technologies...
Uhm, not really an expert, but I think that the point is that in the EU timeframe gold is the currency used in the economy. If the amount of gold in the economy increases, poeple feel richer, demand more goods, and if supply doesn't move much then prices go up.
It's simply because the amount of gold relative to the amount of goods has increased, so gold is less precious comared to other commodities. As prices tell you how much gold you must spend to buy a certain good, and gold is more abundant and thus less precious, prices go up.
Inflation really worked in the same way as today, the only difference is that today you use paper money. If the central bank prints currency, the amount of money increases compared to that of goods and thus you have inflation.
Today gold is good to protect against inflation because it's a commodity commonly considered valuable and which does not deteriorate. As in the past, however, should somebody suddenly discover a huge amount of gold, its price would go down...
