Sometimes it makes sense to move your capital if the original one is way off to the side someplace, and you want one more central to your territory or your intended territory. You could build Versailles or Forbidden Palace instead, but these might not be available, or you might be saving them for another location even further away.
Another reason is if you're running bureaucracy, and you want to shift the capital to a city generating a lot more commerce and/or hammers. I'll frequently get a new city that's great for cottages, and seek to relocate my capital there.
However, just moving it for the sake of moving it, or for developing several new cities, doesn't make much sense. In addition to the hammer cost of building the palace, by shifting the capital to a less developed city you are shifting commerce (the commerce bonus that comes with the palace) to a less developed city, where it is likely to do less good with fewer improvements like libraries, universities, markets and banks.