Governments may want as much economic activity as possible but we've learned the hard way that this is detrimental to the financial system, because it creates damaging boom and bust cycles.

So we empower central banks to intervene in various ways in the monetary system in order to achieve low inflation and system stability.

Activity is only the secondary objective. System stability is the first. Stability doesn't mean that markets cannot go up and down even violently. It means that when they go violently up and down, there remains faith in the currency and people are not suffering from mass unemployment, etc.

When a currency is healthy and has low inflation, hard assets are not a threat. Gold doesn't pay any interest, it doesn't have any earnings. You don't need to convince people to buy stocks and bonds instead of gold, they do that by themselves.

When a currency is unhealthy, hard assets can become a threat to it, but notably it's usually other fiat currencies that are the biggest threat.

Hard assets are useful tools for the financial system because they are less correlated with the market. You can criticise Bitcoin in various ways but the criticism that it is a hard asset with a fixed supply that by not inflating somehow damages the financial or monetary system doesn't land. Fiat money is intended to facilitate the existence of markets in other things, including hard assets.