Antivirus,

I think the term "gold farm" is currently a derogatory term used to explain how those with massive armies (or diplomatic capacity) fund their creation and large demand for gold through the use of a perma-sat.  

Since I'm attempting to clarify common verbiage in the game I'll also define what I believe to be the definition of a "perma-sat".  Such an account is one where the official owner of the account may log in once every 30 to 90 days to grant account sitting (in some games referred to as a vacation) privileges to another player.  This way no player officially has more than the permitted two accounts.  The official owner of the account is not active, no longer active, or never really was active in the game.  This topic is well debated and numerous solutions proposed to limit this practice.

How would one effectively make a city, or several cities, a gold farm?  Go for high population with high taxes.  Keep little or no forces that would reduce gold production.

I hope this helps!