The Fat Faerie, who resides within the Dark Pyramid, is the only one who can give Link the Golden Sword. Link should toss the Tempered Sword into her pond. The Fat Faerie will ask Link if he dropped the Sword. Remember, always respond to Faeries with a truthful answer. "
The Golden Sword is the ultimate form of the Master Sword, and as such it is the most powerful. After Link gets it Tempered by the blacksmith brothers east of Kakariko Village, he can use a Super Bomb in the large crack at the Pyramid of Power to open an entrance to the Obese Fairy's fountain. If he throws his sword into said fountain, it will turn into the Golden Sword.
The Golden Sword is theoretically the most powerful sword in the entire Zelda series, considering that the Master Sword itself used in Skyward Sword and Ocarina of Time was already considerably powerful, and the Golden Sword is the Master Sword upgraded twice. The Golden Sword in the Original Version of A Link to the Past is the only sword capable of dealing damage upon Ganon without the use of a Spin Attack. In the GBA remake, the Tempered Sword could do this as well. The golden sword is 8 times as powerful as the fighter's sword and in the GBA remake is capable of breaking jars and skulls.