The name Gundam is actually derived from the first Gundam series, Mobile Suit Gundam. The giant humanoid robots in most series are referred to as "Mobile Suits." In Mobile Suit Gundam, the main character pilots a mobile suit known as the Gundam (model number RX-78). The Gundam is actually made of luna-titanium, which is basically titanium found on the moon - not Gundanium, which is from Gundam Wing (see below). Later on in the timeline, luna-titanium comes to be known as Gundarium, in honor of the legendary mobile suit called Gundam.
The creators of Gundam have said that the famous mobile suit's name was essentially arbitrary. (It was, in fact, going to be called the Gunboy, but they decided to change that to Gundam.) This is odd, because the Gundam itself has two "sister MS" that have fairly descriptive names (the Guncannon has cannons on its shoulders, while the Guntank is pretty much a huge tank).
The idea that Gundam is named after a new element comes from an alternate-universe series, Gundam Wing, where a Gundam is merely a mobile suit made from the element Gundanium. This idea is rather widespread due to the fact that Gundam Wing was the first Gundam series to be shown on Cartoon Network, making it most Americans' first exposure to the Gundam franchise.