In California gold rush, the gold price did not crash hard, instead, the whole west coast were built. It clearly reflected that in people's consensus, gold is money, more gold = more money, more money = richer
But economists say that more money will cause inflation, because fiat money's value purely comes from it being used to trade, it has no other use, more fiat money = more spending = inflation, but more gold will not cause more spending, since it holds value long term wise, the extra gold will just be hoarded
Gold rush is nowhere near to what OP described (gold as much as dirt). That would destroy price of gold to price of dirt (we use dirt too you know...for growing food etc.)
