Using gold as money prevents government from spending too much. And it also prevents the loss of purchasing power over time. In the United States, Constitutionally, we are supposed to only have gold and silver as currency, because it's tangible. The founding fathers knew the dangers of paper money, and tried their best to help out future generations, but I guess we didn't listen to them. =(
With paper, you can always print more money out of thin air, which weakens the currency. In ancient times, and even today, wars or government overspending weaken a country's currency. How? Back then, they would have to clip coins, or physically chop off a part, thereby weakening their currency. If the country's normal tax is 100,000 coins, and normal spending is 100,000 coins, it works out. But when you have a war (especially a long one), you take in less money, with less people working, cause they are at war. Also you are spending a LOT more. You might take in 80,000 coins and spend 300,000 coins. Same idea for government overspending, and you have to make up the difference somehow.
How to make up the difference? Cut spending, or raise taxes, but those are politically unpopular, so maybe chop off a part of the coins in circulation to mint new coins. But doing that, you devalue the currency.
With paper money, it's much easier. You just print more money out of thin air. That also devalues the existing money. And that's what politicians do today, when they have shortfalls, rather than cut spending or raising taxes, they print money to make up the short fall.
With gold, the government can't just print more of it. That prevents overspending, because the books have to balance. Government is forced to raise taxes, cut spending, or clip coins, which are all very obvious to the people, who will revolt if it causes too much of a burdeon. With paper, and printing of money, it is much more devious, as the people don't know their money is losing value. This is also known as the "inflation tax", by printing money out of thin air.
Another benefit of gold is that it doesn't lose value, but paper does. If you kept $5,000 in paper money under your bed for years, it would lose value, and lose purchasing power. If you have like 10 ounces of gold, that gold is still going to be worth the same amount in 5 years or 500 years. It has real value, so it won't lose value over time.
If gold was our currency, you could invest your gold in stocks or put it in the bank and get back more gold later, that way you can grow your money. But if you don't want to take any risks and would rather just hold onto it, it won't LOSE value year after year, like paper will. Paper loses value year after year, because the government keeps printing more of it to make up budget shortfalls.
This is just my understanding of it. I'm not an expert, so if it sounded like I was rambling, I apologize. Anyway, I'll let Dr. Ron Paul explain it to you himself. =)
http://www.youtube.com/watch?v=5hMeNnbSqkk
http://www.youtube.com/watch?v=TzLidmu_UpY