I don't quite understand your point - are you saying that gold has some kind of intrinsic value that limits its use as money above a certain valuation?
The intrinsic value of gold, whatever that is, has nothing to do with it. A paper dollar has no intrinsic value at all yet is accepted as money. Why do not people swap their valueless paper dollars, which you can't eat etc etc for some paper that is less expensive and overvalued...?
Gold functions as money because it is durable, very difficult to fake, rare and hence unprintable except generally the supply increases from mines ~2.5%/annum, also it is divisible and all gold refined to the same standard is identical. These properties all make for a suitability for money. Diamonds are rare and expensive plus difficult to fake but are not divisible and all are slightly different from each other - not good as money.
Gold would, if used as a 100% backing for the money supply, take on the value dictated by the amount of currency in the system, be that M2 or whatever, without reference to any value dictated by the cost of digging it out of the ground. I don't expect it would form a 100% backing so I don't expect it to rise to $50,000 but we're not so far off 10% of that for a fractional gold system. You could swap your paper for gold should you so wish, it may keep the pollies and bankers a little more hamstrung than they are now as they would need a minimum amount of gold to cover requests for specie instead of paper (De Gaulle requested payment from the US in gold instead of dollars in the late 60's as it became clear the dollar was overvalued relative to gold. Of course Nixon had to stop that so he 'closed the gold window').