This is very complex, so I will do my best to simplify it...

This is very complex, so I will do my best to simplify it although I will use some jargon. Please bear with me. They are my opinions and not certainty given unpredictable long term world dynamics. We are in a state of change, akin to the industrial revolution and yet to take-off. Competing ends will have to come to agreement.

I think the dilemma you pose can be solved for the foreseeable future @1SunTzu if you think about what is money? It is essentially a promise to pay for something based on the value that good or service means to you which economists can express collectively as Pareto Optimum or contract curve. This is not an ideal world and really boils down to what you are prepared to give up to trade.

Background

Money has overshadowed barter in trading for goods or services and then over time became a commodity in its own right as economic activity grew with specialization, industrialization and population. This meant yield could be earned from holding money because it was divisible when others needed money to buy necessary goods to consume or intermediate goods to produce finished product to trade for future goods and services. So the concept of circular flow was born - production creates income then expenditure calls forth more production. Of course many religions put in place usury laws centuries ago to create a base for ethics which some places have been watered down over time by those holding power and exercising sharp practice. As a commodity, the value of money has risen with productivity and credit creation and not its face value because it was tied to the value of production i.e. income. What can 1 cent buy today? The face value represents a rough point in time until all the productive lags flow through to represent your contribution to production and improved living standards. Economists use terms like real GDP which discounts inflation to derive value which they measure through expenditure and imputed values for public servants etc.

As the level of economic activity increased so did the money supply theory pushed by Keynesians and monetarists to the point where Nixon abolished the gold standard claiming it was the strength of the economy that mattered. Very short sighted and not the right medicine for the times now.

To contrast the barter economy with the free market price mechanism, the standout difference is that barter economies only traded their surplus domestic production with simple means to give a sense of finite value; whereas today international trade determines the value of production through exchange rates. The exchange rate is really the value we place on modern barter and in a sense is an automatic stabilizer like progressive taxation or a transfer payment. Much of the international trade today depends on a county's absolute advantage in production or its comparative advantage in terms of exchange rates. It comes back to what we are prepared to give up like barter to get what we want. This determines the jobs that flow from international trade and raises the price also of domestic production because demand is greater in a bigger market. Technically more people benefit from more disposable income and the flow on expenditure calls forth more production for economic growth and increased general welfare. Yep as Malthus predicted in the Malthusian trap, the earth has limits but technology pushed those out further. Now through globalization, consumers can buy directly from source bypassing the middleman in a more efficient allocation of scarce resources given the technology at their disposal over the internet. We are seeing a paradigm shift in the way business, governments and consumers trade. We are also seeing climate change as a limiting factor as Malthus predicted for the Earth's capacity using old mechanisms.

The ethics behind globalization was to raise living standards for more people to generate more real income. With the transfer of knowledge and outsourcing, power and control has been lost by some in terms of strategy that was unforeseen by them. It rings true, if we become too specialized the danger is that a crisis in the production supply chain anywhere due to conflict, climate change or disease it affects everybody. Traditionally, if a country has the absolute advantage and the value of their currency rises, that becomes a paradox too as it becomes self limiting as fewer are able trade with them because value is lost and consumers resort to an alternative means of production or substitutes to source what they need. China has taken advantage of this with more vision that extends beyond 5 year plans and the elections appeasing lobby groups rather than national interest. They have undervalued fixed exchange rates to gain a trade surplus from dominant countries, but in doing so their opportunity cost has to have a different value system is not acceptable to many. On the other hand a floating exchange rate used by most countries may use more of their resources in exchange (lower exchange rate) which depends on demand and supply and whether you are a price taker or a price maker. There is a definite shift in power and strategy here. Disease and climate change will force people to unite in a common cause.

For centuries gold has been used as money. If we look at the four functions of money, money has to be an acceptable means of payment, it has to represent a store of value, a standard of deferred payment and it has to be divisible.

It was Nixon who reduced the acceptability of gold as a means of payment, but now the Bank of International Settlement has effectively reversed that decision where gold can be used with a basket of currencies for trade. Countries may elect to individually decide what they do, but I note the World Bank soon squashed El Salvador's acceptance of Bitcoin. Of course the BRICS countries have had their alliances change from within, e.g. India and China, so there are all sorts of dynamics and politics at play. But in the end politics is a numbers game, and BIS is a potent body determining the medium of exchange and acceptance. As international trade raised domestic incomes, if follows the domestic market will gain direct access to international markets as evidenced by the growth of online ordering from overseas. They will also be able to use gold or another currency as an acceptable means of payment as determined by trade agreements and BIS. There is no longer the demand to settle trade in one form of international reserve currency. The $US as an international reserve has declined 60% in this regard. Paypal is still growing as are credit cards but there are new players on the block in crypto etc. and China will back its currency with digital gold. I don't think limited gold supply is of such significance compared to trade agreements utilizing exchanges of aid in physical goods or services, fiat for trade etc. But there is a nice niche for it now.

The effectiveness of monetary policy by Reserve Banks in the domestic economy is decreasing. With a free market banking philosophy introduced by Keating in Australia, the banks are able to import inflation by borrowing at cheap rates which we see expressed in the housing market through excessive demand. I see the debt of increasing money supply in the host country, is using international allies to pay down their debt like a river that has many tributaries. However, given the inflation in the host countries, effective yield has fallen and I see those investors in the host countries moving to countries where yield is greater because they hold valuable resources given the EV revolution and climate change which may offset monetary policy issues. So in many ways an automatic stabilizer may emerge to generate more income through investment in Australia's natural resources as an alternative to perceived monopolistic supply from China until countries restructure. I note that both India and Australia have now been buying gold to add to international reserves which was contrary to past policy. So gold is definitely regaining its traditional status as an acceptable means of payment.

So to answer one question, yes their is still a greater need for fiat currency than gold as a promise to pay a value and that value is determined by the exchange rates which are in turn determined by the efficiency and effectiveness of the domestic economy and alliances. Gold is playing catch up in true value and for some, significant gains can be made when the value of their fiat currency is declining.

The store of value was corrupted by excessive paper claims to the same ounce of gold. We witnessed the corrupt practices of the last financial crisis where prudent government supervision was lacking. The new BIS ruling is that banks hold gold in a 1:1 ratio and London bullion banks which currently set the daily price of gold have until late January 2022 to comply. The essence of your question comes back to the store of value because if this does not hold then the standard of deferred payment is lost too, so that forces contracts to be valued in other currencies for trade purposes e.g. $US or Yuan depending on significant trading partners or alliances or simply price and value under free trade agreements. The dominant currencies get additional yield to prop up their domestic lifestyle.

However, if you outsource production and yield disappears at home causing structural unemployment, recession and wealth polarization, it takes more than seeing 4-6% in rising prices for new producers to respond and bring forth production which should be consumer driven. Consumer expenditure accounts for roughly 60% of GDP. But if restructure has been left too long and outsourcing has created structural unemployment, then Covid comes along in a perfect storm, then the circular flow mechanism fails. We get stagflation. Merely polarizing the wealth by pumping up the stock market with free money and negative interest rates causes a loss of value. Shares rise in money terms, not in terms of yield through productive capacity which has to be sold because a transfer payment does not increase disposable income of consumers. Bubbles burst. We have witnessed false spikes in yield on 10 year bonds to attract funds away from gold which I called out earlier in the year. Its the 30 year trend to which attention has to be noticed and the long trend in the value of the US dollar. The US debt is astronomical as is the government debt around the world now fighting Covid. Who pays this debt back?

Within a band of operations, the Reserve bank has used of a dirty float to stabilize exchange rates at times, it is less effective controlling the size of the domestic money supply now through open market operations by setting the prime rate. Banks can choose to ignore that and borrow overseas. The better lever left it seems to compliment fiscal and wages policy, is that of trade policy through the exchange rate. Gone are the days of embargoes and tariffs. Banks need turnover and volume in loan adoption to remain afloat. We know if rising prices get beyond 6% or unemployment 6% there is a real danger circular flow cannot increase productivity for acceptable price rises and we get monetary inflation which erodes purchasing power which can lead to hyper inflation or stagflation. Other countries do not want to import our inflation because that is a threat to trade. Its a very difficult balance unless another means of payment is accepted. The most acceptable hedge in the past has been gold and now it is a basket of currencies including gold with full status.

Finally, I think I can answer the juxtaposition of limited gold supply and monetary inflation. It has to be seen in terms of the fourth function of money and that is divisibility. Gold is regaining its status of money as implemented by BIS and is accepted as a medium of exchange. In the past its value was diminished by the multiple paper claims to the same ounce of gold and the bullion banks merely arranged artificial swaps to camouflage the manipulation to meet delivery. It was manipulated low demand which enhanced the value of certain fiat currencies for capital inflow to benefit their domestic economies IMO.

The demand for gold is being be restored to the point it represents the intrinsic value of the goods and services in terms of of productivity just as the value of fiat currencies should be managed. If you want to specialize in gold trading there is opportunity. The answer lies in the new technology to implement the 1:1 ratio of paper or digital claim to gold. This does not preclude its rising value. The crypto gold currencies enable the gold to be divisible to facilitate this process. Just as money can be inflated over time through productivity, gold can be divided further in the opposite direction to represent the same value as a managed concept. But ultimately countries have to consider what the are prepared to give up in order to trade and that will for the foreseeable future be linked to exchange rates which determines the value of their fiat currencies. I note it is believed that China's GDP will surpass the USA GDP in the foreseeable future, and it has said its currency will be backed by gold. China does not have a floating exchange rate, so this could be problematic. However, domestic consumers will now have greater choice because its plain to see they don't trust governments around the world with the rise in Bitcoin. I think Bitcoin will be a temporary phase because it is artificially made and China has banned it along with the World Bank. That's mutual agreement. Its not universally accepted. The supply of gold will increase due to demand for it and lower grades will become economic. Direct trade in gold, will like Bullion FX, value proven reserves that are not yet mined. Let's no forget the role of the Europeans in changing the BIS rules and the size of their market along with India and Indonesia. It is indeed a brave new world.

Apologies for long windedness.