I agree, it's legit. Experience with BitGold (now GoldMoney Personal) can be get a bit nasty sometimes, but it is not advisable to make relatively large transactions through PayPal either. They will get better with time.

Since the client made a Bitcoin deposit, any AML/KYC checks should have been done when the deposit was made, not when a withdrawal is requested, because the withdrawal would not be able to make the pattern any more suspicious than it may already be at time of deposit (assuming some time passes between deposit and withdrawal and the withdrawal is to client's own account). It is dishonest to accept a Bitcoin deposit, work with the funds, but request source of funds proof for the withdrawal. In particular, this can be viewed as delaying the AML/KYC verification of the deposit. If the deposit is legitimately suspicious, the delay would be probably illegal, as there would be failure to carry out the duty imposed by law at time of deposit. And again, consider this: what if a client makes a deposit, has proof of the source of funds, but requests withdrawal a decade later and no longer has the proof? Let's say you make deposits all your life, and when you retire, you decide to withdraw everything. Would it be reasonable that you provide the source of funds for all of your deposits years and decades later? "Sorry, it is now 2054, but we now requested and you failed to provide proof of the source of funds for your deposit no. 13 that was made in 2017."

Sorry to hear about what happened to you.

Here are the issues I see in your case:
(1) BitGold didn't ask you to provide AML verification of the source of funds when you made the deposit, but is asking you for that in connection to your withdrawal transaction. The source of funds for your withdrawal transaction is your deposit with BitGold, and they should have full records of that. It is considered normal to keep most of your financial documents, e.g. bank statements and tax documentation, only for a certain number of years. What if, say, 20 years passed between your deposit and withdrawal, and you no longer had documentation of your source of funds?
Again, if BitGold was really so extremely concerned about AML compliance, if would have asked you for the source of funds when you made the deposit, not when you are making a withdrawal.
I assume that you are requesting a withdrawal to the same bank account you used for deposit, but if not, there is still some validity to this argument.
(2) If a financial institution suspects that a deposit is connected to money laundering, they may refuse to process the transfer. In that case, the funds would be either sent back to the account they where deposited from or confiscated by the authorities. A financial institution cannot confiscate your funds without authorities being carrying out due process. Here, BitGold would either have to return your deposit back to the account it was sent from, or, IF there was proof of money laundering, authorities would confiscate the funds. But, you cannot have money laundering if there is no existing criminal property.
(3) If you deposited the funds and requested to withdraw the funds to the same bank account, that doesn't qualify for suspicion of money laundering. Money laundering involves moving funds between different accounts and from one account holder to another, but here, presumably, there is practically no net movement.
(4) In most or all developed countries, the financial institution may ask you about the source of funds when you open the account or if there is a sizeable deposit. Financial institutions have to ensure that the client's transactions are consistent with the knowledge of the customer, his business and risk profile. There is no obligation to obtain proof of the source of funds at all, let alone beyond a reasonable doubt. If the client's explanation is consistent with his risk profile, the financial institution may simply note the explanation on file. (Personally, I do various transactions in similar amounts from time to time, and I never had to prove the source of funds except once, and that was when I was opening an investment account.)

There may be no definite proof that BitGold is a scam in this thread, but I find many arguments here quite reasonable. On the other hand, you present no valid arguments but engage in an ad hominem attack on everyone who doubts BitGold's "holiness".

You sound like you may be a BitGold stakeholder, such as a BitGold employee. I also see that your trust rating on BitcoinTalk is negative, and there is a warning "Trade with extreme caution!"

I am not sure if BitGold (a service provided by GoldMoney Inc.) is a scam, but
(1) It has falsely asserted it was the first to offer a gold-backed debit card;
(2) As of 2015, GoldMoney's sales have collapsed by 78% over three years;
(3) It lost £9.4 million in just one year – 2014;
(4) Its net assets fell from £25.4m in 2013 to £13.1m in 2015;
(5) At its March 2015 year-end it is still posting losses.

BitGold postures itself with KYC- and AML- stylized rhetoric and scrutiny of legitimate transactions to give the impression that it is legitimate, wonderful, but you see, it has very high standards. No financial institution (bank, credit card company, broker, money transfer service) in most or all developed nations challenges or requires justification for all account actions and transactions. But BitGold does or is very close to doing that, creating a pretext for keeping a client's money under the guise of the client not meeting its proprietary implementation of KYC/AML requirements.

If it is what it looks like, this strategy somewhat resembles the 419 advance-fee scam, where the scammers pose as authoritative figures from banks, diplomatic corps, and governments, telling people "Well, you see, we are the real deal, and you just don't know how the world works. All you have to do is email us a copy of your passport to satisfy the KYC requirements and send us $3000 to cover the diplomatic pouch fee."

My personal emotional bias is to give BitGold the benefit of a doubt, and I really wish BitGold not to be a scam and not to go bankrupt. But we all need to use reason and evidence when making decisions concerning personal finances, just as pretty much anywhere else in life. Unfortunately, one of the possibilities is that BitGold is a pyramid scheme that will take years to be exposed.

Again, I'm not sure if BitGold is a scam -- I do think that they have ripped off a number of people -- but there are substantial indications that BitGold is a scam, and two weeks after I requested a debit card from BitGold, it still says "Pending Requested Card". I heard that BitGold doesn't approve all bank account withdrawals, so maybe they will never send me the debit card, decline my bank withdrawal, and keep my money.

Edit: I forgot to mention in this or my previous post: I was supposed to get a bonus on the first deposit, I saw it "applied" to the total when I was making it, and I didn't get any when the transaction was settled. Bait-and-switch is a form of fraud; it is not a joke, and there is no excuse.

Here is my experience with BitGold so far.

I have signed up for an account, uploaded a copy of my ID, made a deposit using a credit card, and requested a prepaid card.

A day or two later, my account is suspended, and my prepaid card request is denied. They are requesting me to provide a secondary ID and a copy of my credit card. My account is reactivated.

I have requested a prepaid card again. The request was not immediately denied, but it still pending.

I added an ACH account and made a deposit into the BitGold account. Next day, the transaction was canceled with the description "Chargeback - Aborted". It did not appear on my bank account.

I asked BitGold customer support why the ACH deposit was canceled, and they said that their ACH provider has indicated that I don't have sufficient funds on my bank account.

In fact, I have much more available funds on the account than the transaction amount, and I explained that to them.

They replied that in order to complete the ACH deposit, I need to provide them with a bank statement showing that I have sufficient funds, and that they are unable to waive this requirement.

I think that when you add an ACH account on BitGold by entering the login information to your bank account, they use an automated system that logs on to your bank account online and checks the available funds. In my case, it didn't work correctly -- or maybe BitGold wanted a pretense to obtain my bank statement.

I became concerned about my banking privacy and deleted the bank account from BitGold. I also changed my online banking password.

Needless to say, I found sending my bank statement to BitGold to be unacceptable. If I really wanted to go satisfy their request for proof of sufficient funds, I could ask the bank to issue a bank reference, but that would be a lot of fuss when I am still undecided whether I will use BitGold going forward.

I've read this entire thread and the reviews on Trustpilot, and don't think I sufficiently trust BitGold at this point to seriously use their services.

I guess I will keep the account open for a while and see what happens.

I heard that PayPal's quality of service has improved after a number of class action lawsuits. Maybe I should give BitGold time to mature and round its edges.

It is concerning that BitGold doesn't charge for gold storage and makes a huge emphasis on its referral program. I heard that its average account size is something like $30. I also heard that BitGold's financial statements don't look good. I would like to see an overall improvement of this as well.