4 ideas
After the conquest of the Americas, Spain took in enormous quantities of gold and silver, yet the treasure flowed straight out again to pay for wars, imports and debts to foreign bankers, and it fed a century of inflation (the Price Revolution). Holding the most precious metal did not make Spain wealthy; productive capacity did.
Because each currency could be exchanged for gold at a fixed rate, the money supply was tied to gold reserves rather than to what the economy needed. When gold flowed out or output grew faster than gold stocks, governments had to contract credit and let prices and wages fall. This forced adjustment onto employment and debtors, which is why the standard broke down under the political pressures of the interwar period and the Depression.
Gold has little practical use, so its monetary power comes from a self-reinforcing collective faith that others will always accept it. It became a store of value because it is scarce, durable and hard to counterfeit, and because every generation expects the next to want it. On this view, gold 'madness' and gold 'discipline' are the same psychological phenomenon: trust placed in an object instead of in institutions.
The coins of Lydia under Croesus, made to a standardized weight and purity and stamped with a royal mark, let traders accept metal by count instead of weighing and assaying every piece. The stamp moved the job of verification from each transaction to the issuing authority. This lowered the cost of trade, but it also tied the currency's credibility to the sovereign's honesty, which opened the door to later debasement.