There's 16 good answers to this already, but I'd like to throw my ideas into the mix as well.
First, I'd like to dispute the fact that unlimited gold would tank the economy and ruin everything
The most basic guiding principle of any economy is that Things are worth what people believe them to be worth. The concept of price changes due to supply and demand is a relatively recent one. Modern humans know to be on guard about the economic effects of obtaining and trading a huge amount of supposedly scarce resources. Pre-industrial humans much less so.
The idea that gold would instantly become worthless is one borne off traditional economic assumptions that information is free-flowing and instantaneous, and people have perfect information. In a mediaeval context neither of these things are true. So while, yes, gold would become devalued in the long run, there is plenty of time in which to exploit man's greed for gold and reap huge economic benefits.
As the king of a small sovereign state with a single <PERSON> sword, this is what I'd do:
Use it for executions.
Keep its existence hidden as much as possible, and wrap the process of turning criminals into gold into a ritual with a whole lot of religious mysticism.
Use the first 'batches' of person-gold to forge alliances with neighbours and hire mercenaries if the setting allows.
Just like the modern diamond trade, you have essentially a monopoly of large amounts of gold and can artificially restrict the supply while trading initially small but slowly increasing amounts of it.
Eventually, when my position is secure enough, I will start decorating the city with it. 159
Let it be known far and wide of the Golden City, the new hub of trade, wealth and Philosophy. Once a place is established as the must-go location for trade and pilgrimages, that reputation sustains itself.
Some practical military uses for gold
Gold is almost twice the density of lead. While it is considered a soft metal, a club made from gold is still going to hurt like hell. Furthermore, there was good evidence in ancient treatises that lead projectiles thrown from slings were especially deadly, owing to the density and lack of air resistance from a small lead sling-bullet. Gold sling-bullets would presumably be even more lethal. If gold can create a military advantage, I say use it!
I think a '<PERSON> sword', if used judiciously, sparingly and secretively, could be used to great benefit to the Ruler in the right circumstances. 523