Pots of Gold will only spawn on the same level that a Leprechaun spawns in. They can be inside of any normal block in the level. If the player obtained a Four-leaf Clover from anywhere in the level or from killing the Leprechaun, a rainbow will be visible, pointing the way towards a certain block. Destroying this block under the rainbow will reveal the Pot of Gold.
As The City of Gold is home to many Leprechauns, Pots of Gold can be found lying out in the open in large quantities in the level. One specific chunk that can spawn contains 4 Pots of Gold, all protected by two Crush Traps.
Whipping the Pot of Gold or throwing it violently against a surface will cause it to drop a Gold Coin or two. Typically, a Pot of Gold will release around 20 coins before breaking.
Pots of Gold are of great value to the player if they are in need of money, particularly in The Jungle, where the ~12,500 Gold Coins it will drop will prove invaluable to affording items in The Black Market.