You can't eat it, drink it, drive it, or live in it. While you can wear some as jewelry, it won't keep you warm. It does not earn interest. It is not really good for anything that is necessary. Metal coins and paper money are merely tradable symbols for the efforts and possessions of humans. It is only people's attitudes and beliefs about these symbols that make them valuable. The only real basis for gold's value is the labor, machinery, and energy needed to find, extract, form and get it to market. That is difficult and therein lies it benefit and problem for economics.
Let's look at what happens in a pure gold currency economy. To make it simple, suppose that an economy has only 1,000 ounces of gold. Each person has a balanced budget, that is, each spends all of his income on what he needs and wants. The 1000 ounces of gold goes around and around: the shoemaker buys from the baker, the baker buys from the farmer, the farmer buys from the tailor, who buys from the shoemaker, etc. If one of the society's members decides he wants to produce something new, there is no extra gold in the economy to invest in it. If one person has a new baby, there is no extra gold to buy anything for it. Since everyone is earning and buying what he or she needs and wants already, that person will have to give up something to invest or buy this new item or not do it all. If one of the members decides not to buy something, then this flows throughout the society and many of the other members cannot buy something since that gold no longer goes around (see Paradox of Thrift by Keynes). With an economy based on gold, you either have to conquer someone and take their gold, or go prospecting; not timely or likely and getting harder to do all the time. As a result, all ancient and most non-fiat money economies stagnated or collapsed when their source of new gold ran out, was horded, or saved. Gold is an unthinking and intractable economic master which has historically caused stagnation and war.
Humankind's ability to produce goods and services is limited only by our minds. With paper and electronic money (fiat money), a wise government expands the money supply in step with new production, services, and population growth so people can buy the newly produced items they want and need. Gold is limited by nature and technological innovation. The supply of gold cannot automatically, seamlessly expand when needed to fund new human ideas and production, to fund the needs of an expanding population. The world got lucky with the influx of the New World's gold and the California strike which stimulated stagnating economies.
You often hear from people, particularly those who own lots of it (gold bugs), "Gold is the only "real' money." That is definitionally false. "Real" is anything that has actually occurred or existed. Sea shells, arrowheads, salt, animal hides, butter, cacao beans, tobacco leaves, barley, beads, the giant stone wheels of the south Pacific, many things, were "real" money since people actually used it to exchange goods, services, and property. What these gold salesmen are really saying is three things: 1) Gold does not deteriorate or waste away like barley, wood, iron, etc. 2) The government can print as much paper money as it wants, thereby enriching it while diluting the value of money already in the hands of others. 3) Gold is so rare that it is hard to increase the amount of it in circulation, so it is hard to dilute the value of it. But gold, silver, diamonds, etc. are commodities subject to the laws of supply and demand. They have no immutable or innate value.
Gold inflation and bubbles have happened before. The discovery of the New World's gold flooded the market, resulting in crippling inflation for Spain. Spain also unwisely used its new found gold to buy what they needed from other countries rather than invest it increasing production in their own economy by their own citizens. They also used it to pay for wars and trade route protection as the US is doing today. Cortes wrote in the 1590's: "Although our kingdom could be the richest in the world for the abundance of gold and silver that have come into it and continue to come in from the Indies, it ends up as the poorest because it serves as a bridge across which gold and silver pass to other kingdoms that are our enemies." People quipped, ~"Wealth is born in the Indies, dies in Spain, and is buried in Genoa."
A second gold bubble happened again after the discovery of gold in California in 1848.
NY Gold Price 1791 to 2010 by Jimmy Walter
The gold bugs ignore these bubbles and assert that it cannot happen again. However, the amount of gold mined has gone up geometrically with technology and price. These two factors make discovering and processing poorer and poorer ore worth the effort. Not withstanding that, the total amount of gold mined in all of history is still only 193,000 metric tons, enough to make a cube just 72 feet (22m) on a side or one acre, 9 feet deep, easily fitting into one large warehouse. That is not enough to replace all the currency around the world. But what if suddenly there was much, much more recoverable gold? On average, seawater is around 13 ppt gold. Since there are 1.3 billion cubic kilometers of sea water on earth, there are 169,000,000  metric tons of gold in seawater, 875 times more than has ever been mined. When someone invents a way to easily extract it, the price of gold will plummet. (It will happen -- remember people said man would never fly.) Moreover, the total gold on the surface of the earth and in its oceans is less than 1% of the gold in the earth, most of which has sunk far below the surface. Volcanoes brought most of it to the surface and who can say one won't bring up the mother load again?
I must give the gold bugs their due. History is replete with governments that inflated their currency and citizen's wealth into nothing by reducing the percentage of gold and silver in their coins or with printing presses. It was Greenspan  and the FED who blew up the bubble that got us into our current fix, just as the FED bubbled the economy in the 1920's and then kept deflating the economy over and over in the 1930's. I must give credit to Bernanke; he is not making the mistakes of the 1930's FED. He inherited the mess from Ayn Rand's faithful followers, Alan Greenspan, the Wall Street Journal, et. al. This time, it is Ayn Rand religiously fanatical disciples: the capitalists, Republicans, Libertarians, and Tea Partiers.
You could not use 100% gold backed certificates in place of fiat money since there is not enough gold in the world, even at its current price (which is falling as I write). What would you buy gold with since you are replacing fiat currency that nobody would want? Only the people with gold already would have any money. The gold salesmen/current holders are claiming we can go to a currency based on a percentage of gold. That is lipstick on a pig, fiat money tarted up. The-powers-that-be can just change the percentage of gold as the kings of old did in their coins.
What about supply and demand, the real basis for prices outside of speculators who have driven the price up temporarily as they did in previous bubbles? While investors accounted for 35% of gold consumption in the first half of this year, that was a decline of 23% from last year. 53% of gold production is going into jewelry and 12 - % into technological uses. Overall, second quarter 2011 demand was down 17%. That does not bode well for the bubble. There was "healthy" growth in jewelry for the first six months, but this may be suppliers buying now in anticipation of higher prices for their season, the end of the year when their demand spikes prices. There were "modest" gains in technology. Dental demand was down 12%, substitute materials pushing gold out like substitute materials pushed silver out of photography. This material switch can be anticipated to occur with gold for all technological uses; as the price rises, users will find alternatives. The surging economies of India and China account for 52% of global bar and coin investment, 55% of jewelry demand. They are not rich people. They may sell to take some profits. If their economies sputter, so will their consumption. 69.4 tons were purchased by central banks, which can just as easily sell it to burst the bubble if it threatens their currency. 
Gold Consumption 2009 to Present by Jimmy Walter
People have been proven to be bubble-headed by history. Americans seem to have the most bubbles. To name a few, there has been the 1920's and other stock market bubbles, the Florida land bubble, the new-issue stock bubble, the savings and loan real estate bubble, the dot com bubble, the mortgage bubble, 1980 gold and silver bubble, and now we have the current gold bubble. I'm not saying you should get completely out of gold now. You may be able to ride this bubble to greater wealth until it starts to collapse (which may be happening now). But who knows when that will be exactly? The gold bugs were wrong on when this bubble would start. They have been predicting the end of fiat money for over half a century. They will be wrong on the end of this bubble just like they were wrong on the end of the one in 1980. My father taught me to sell half when you double your money (I did); then you are still in the game and all your gold is profit. He also taught me that you never go broke taking a profit. "The bulls get some, the bears get some, and the hogs get slaughtered." My advice is to sell half or at least a large part to cover your costs and pay off your mortgage. Paying off the mortgage on your home is always your best investment. Look what happened to all the home owners who squandered their equity in the mortgage/housing bubble. Sell more parts along the way and be ready to pull the rip cord and take far less than the top dollar for the remainder because when it collapses, it will be fast and furious, like it always is.
Finally, what is the end game? As I said before, you can't eat it, drink it, drive it, or live in it, nor does it pay interest. Gold is not legal tender. Governments will undoubtedly, legally prevent it from becoming legal tender. If fiat money is to become more and more worthless, how do you take your profit? What do you get in exchange for your gold? Gold is just a shiny stone that mesmerizes the naive natives.
Please see my music video on the crisis, "Everything is workin' (So Why Aren't We?), a parody of Bob Dylan's, "Everything is Broken". It rocks! (Of course, I am prejudiced)
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