On the contrary, if you buy and hold coins, this diminishes liquidity and thereby increases volatility. How could you possibly stabilize the exchange rate through increasing volatility? It is liquidity that supports exchange rate, leveling off speculative component from it...
And gold supply is limited too (somewhere around 2-3% annually)
Yes, the volatility will be high, maybe that will always be a character for bitcoin during its life time (The recent crash again proved this). So it is best suitable as a medium of long term saving and investment, not for daily transaction. If your exposure on bitcoin is 10% of the risk capital, then the yearly return will be 500% and the risk is 7%, still astonishing. Of course when current wave of mining equipment upgrade finished, the volatility will drop
If the gold price rise 5x in a year, then there will be gold mines opening everywhere and the gold supply will increase immediately
Gold already rose something like that within a decade, and I don't see gold mines opening everywhere. The answer is quite simple though. Gold volatility is somewhere in between bitcoin and dollar volatility, i.e. it is too volatile and those mines would be at a loss most time of their operating life...