Or what happens if gold steadily declines as a store of value?

The same thing that has been happing for the past 10K plus years. Gold like all commodities loses value over time due to inflation (1-3% historically for gold) Of course if gold maintains its value relative to other commodities or consumer goods then it is doing a better job than fiat currencies.

What happens if gold becomes $50/oz because some alchemist finds out how to make it out of sea water?

Sea water nope. The amount of energy you would need to extract gold from seawater makes that idea simply unreasonable. Asteroid mining on the other hand could get you a drop in price to $50 although you have to keep in mind that if we are mining asteroids on a regular basis then a lot of other things are going to be come cheap as well like energy (through space based solar) and chemical processing due to cheap platinum catalysts, so gold might hold its value relative to consumer goods anyway... but not as well as fiat currencies or cryptographically enforced digital currencies in this case.

I'm just wondering what you think that would do to this token if so.

It would follow the price of gold just like an ETF. It would presumably be safer to hold than a CFD based stable currency that might have margin calls on the backers if price swings are too quick.

It would be interesting if gold did lose significant value yet digix found a way to revalue the asset with the fall to somehow correct the loss and not hurt those invested.

Nope, if you are owning gold you are owning gold. If you want to hedge your position then you should either short gold (but then why hold gold as a crypto token in the first place) or simply limit your position size. You can make tokens out of nothing and destroy them to manipulate prices but you cant magically make value out of nothing. Simply fixing exchange rates results in gluts (no one wants to buy and supply sits idle) and shortages (you set the price too low and your stock runs out) Presumably for Digix to do the most business they have to track the global gold price as accurately as possible to keep their prices within the marginal rate plus whatever premium they have for their product if any.