They are competing in the sense that both are -- or could be -- used as store-of-value assets that hedge against currency failure or devaluation, failure of banking systems like bail-ins, etc. In that sense, they each occupy a certain "market share" of the store-of-value space.
We can take a stance that all products that can be used for the same purpose compete with each other, but isn't it a bit silly? Various foods compete for the title of best nutrition, cars compete for the cheapest, most reliable and most friendly to the environment and so on. Does it mean anything to an average user? Id's go with nope.
Bitcoin is there and gold is there. If bitcoin suddenly stops existing all that value won't jump into gold.
From my point, people make choices and these choices not always lead to using the best product according to the researchers or polls, but often the product that goes well with their interests. For that reason, despite gold being used as valuable item for thousands of years, many people (including me) choose unstable bitcoin over it.
but surely it is not so complicated process, in it's core at least. The real problem is the decontamination technique, because the final product is radioactive and this is the moment where 90% of production costs go, of course when you need to make it safe. True, you can't produce gold at the profitable rates, same as other altcoins. Diamonds however... totally different story. 
