Yes, gold is horrible as an investment. It is a hedge against inflation and that's it. Gold also tends to do well when the economy is doing poorly because more people fear a collapse of society and buy gold, thus driving up demand.

If you know what you are doing, you buy and sell gold with a flat fee per ounce (like $20 or so). There is no reason to pay 3% or more, you are getting ripped off. Real gold dealers operate on very thin margins because there is a lot of competition.

My real problem with gold is the way it is taxed in the US. Gold is ALWAYS taxed as a collectable, so it is taxed at 28% if you are a middle income person. There is no 15% long term capital gains rate for gold! Most people don't seem to realize this. A lot of states have their own tax too. For example, where I live in Massachusetts, you pay short term capital gains ALWAYS on gold, which is 12%. That is horrible! So you pay 12% state plus 28% fed for any appreciation on the gold you own when you sell it, no matter how long you've owned it.

Also, I believe gold is in a bubble now and is due for a correction. Maybe around $1000/ounce is more reasonable than the $1400-$1600 it's been recently.

In short, only buy gold with bitcoins if you are looking for a quick way to cash out your bitcoins and don't have a the highest level of verified mt gox account. Or maybe if you are trying to evade taxes on your bitcions, not that I'd ever recommend doing that. And even then, sell your gold right away once you get it.