What is the point of gold in this game? I am at level 17 and have 40K and have yet to spend one gold on anything. There is so much loot that there is no need to buy anything. Does the gold become important at higher level? Or should I just stop collecting it?

When you die, you have 3 resurrection options - You can choose to be resurrected exactly where you died with a penalty to "Experience" and "Fame" points, to be resurrected at the entrance to the current dungeon level with a penalty to your "Gold" or to be resurrected in the town with no penalties. So, keep collecting it.

What triock said.

You'll come across some hard levels, eventually, especially the side-quest teleport maps, and, trust me, you'll die at least once, during those. Since I don't recommend sacrificing experience and fame points to be resurrected at the exact spot in which you died, stack up on gold so you can spawn at the entrance of the level.

If you're really, really good at Torchlight and end up never dying a single time, there are still some options to spend your gold, there's a guy in town that sells equipment in a sort of "gamble mode" (he's near the entrance, standing close to the river), he sells really expensive stuff that, more often than not, pays off to buy. It's not ideal, these games are all about the loot you find, not the equipment you buy, but it's a viable option to spend your money on, provided you won't die and won't need gold to respawn at the entrance to the level.

N.B.: The further into the mines, the higher your level and/or the more difficult the side-quest teleport levels, the more gold you need to respawn. It will reach absurd amounts, eventually, so, if you think you'll die a few times during later/harder levels, stack up on that gold, as it is way better to sacrifice gold than experience and fame, and definitely better than being sent all the way back to Torchlight.

Don't forget the enchanter in town. He can turn an awesome weapon into the greatest weapon of all time (assuming chance is on your side, and he doesn't disenchant the item completely!) This is usually how I end up spending all of my money.

Gold is also useful for buying ember from the gem merchant. I think she only sells low quality ember, but if you keep collecting them, the transmuter can make some epic gems.

And sometimes the arms merchant might have something you want. Maybe he will have a couple of purple items to complete a set you are wearing.

Okay I just repeated AdamR. OOOPS! :P

Actually collecting gold for resurrection is stupid, since it takes a percentage of your gold. so the more gold you have the more gold you will lose. The best way to spend it is to enchant items and gamble, as well ass buying gems.