Whereas in C we cannot say if the quantity of gold decreases then the demand (no relevance to supply) will also decrease.
Actually, according to the stimulus, the level of demand is equivalent to the gold supply. So if the quantity of gold (the supply) decreases, demand WILL decrease.
However, the prepositions in the stimulus only tell us the following:
increase in demand -> inflation
we do not know whether a decrease in demand causes INFLATION (which is what C claims), and further more, we do not whether a decrease in demand cases deflation.