Gold has never been a common every day currency, the coins would be too small. Gold has always been rich persons money where a small coin could hire 10 men for a days work. I don't think gold and bitcoins will ever be in competition as currencies due to this.
See
Shire Silver for the counterargument to gold not being usable in everyday trade.
I think bitcoins and Shire Silver complement each other nicely. Bitcoins are great for Internet and other electronic transactions, while Shire Silver fulfills the need for in-person anonymous transactions.
I agree that silver makes a fine everyday currency. Up until the recent century it had been the case for millennia. Of course this was entirely possible due to inexpensive coining sponsored major governments. See
http://en.wikipedia.org/wiki/Free_silver for a bit of history on the importance of cheap mintage.
Any silver currency that has a high premium over intrinsic value will have great resistance becoming an accepted currency. Even if you enforce a higher value to justify a premium then
http://en.wikipedia.org/wiki/Gresham%27s_law comes into play.
Did you visit the link I posted? Its to a gold product, not silver. Shire Silver is a brand.
Also, there's no such thing as intrinsic value. The cards are worth more than spot price because of the added values like putting the metal into a more usable form suitable for everyday trade. But of course, what it will trade for is up to the market, just like with bitcoins (which also have no intrinsic value but trade as the market determines.)
Yes, when governments create the money, as in coining silver, they sometimes do it "for free". But the actual price of the coining is in the power it gives the government. Money is a product, and like any product it needs to make a profit of some sort for its producer. I would rather have that profit be readily observed and quantifiable as part of the price of the money than as an invisible lever of power wielded behind closed doors.
And Gresham's Law only applies when government forces people to accept bad money. Bitcoin (and others) will outcompete even government monopoly money and put an end to legal tender laws that enable Gresham.
