Discovering Gold in the American River

On January 24, 1848, one hundred and fifty years ago this month, a man named James Marshall was inspecting a millrace that he had just constructed on the American River, not far from Sacramento, California. He had turned the water into it the night before to clear the debris, and now something “about half the size and the shape of a pea” glinting in the water caught his eye. “It made my heart thump,” he remembered later, “for I was certain it was gold.” To his workmen, he said, “Boys, by God, I believe I have found a gold mine.”

He had, indeed.

It is an oddity of the American past that one of the most significant events in the nation’s history, the California gold strike, should have taken place in a foreign country. But it was not until February 2, 1848, that negotiations to end the Mexican War resulted in the Treaty of Guadalupe Hidalgo. And it was March 10 before the treaty was ratified and the Stars and Stripes rose over the Southwest in exchange for fifteen million dollars. Had Marshall made his discovery only a few weeks earlier, the histories of both countries might have been very different.

Needless to say, the attempt by James Marshall and his employer, John Sutter, to keep the gold find secret was doomed to nearly instant failure. Indeed, Sutler, the owner of fifty thousand acres in the Coloma Valley, was ruined by the onrush of gold miners, and both men would die broke.

The irresistible allure of gold is not hard to grasp. It not only was worth $20.66 an ounce at that time (a very good week’s wage) but could be mined by people without major capital.

Unlike most metals, gold is chemically inert, only very rarely combining with other elements to form molecules. Therefore it is usually found in nature in its pure form, although often as “dust” or small flakes. But another characteristic of gold, its very high density, makes it relatively easy to separate the small particles from other minerals. Density is measured in grams per cubic centimeter. By definition, one cubic centimeter of water weighs one gram. Quartz has a density of about 2.6 grams per cc; iron’s density is a littie less than 8. Gold’s is more than 19. In other words, a gold nugget equal in volume to a mere cubic inch weighs well over half a pound.

This very high density meant that as gold eroded out of the hills and was carried downstream, it settled out of the moving water before anything else. Thus it was concentrated wherever the water slowed down, in an eddy or on the inner side of a bend in the stream. Swirling the gravel found in such places in a broad, shallow pan was enough to find significant gold in rich deposits.

In the early days of the gold rush, it was not uncommon for a man to pan ten or more ounces a day out of a good stream, with always the hope of finding a large nugget. So while panning for gold was very hard work, it was possible to earn more in a week than the average worker could earn in a year, with the possibility always present that one might find a fortune.

So, it is hardly surprising that when news of the gold strike spread, the effect was electric. San Francisco, with a population then of less than a thousand, was nearly emptied, and its harbor became choked with shipping as sailors headed for the goldfields, stranding their vessels. An entire platoon of soldiers deserted from a local fort. As one soldier explained, “The struggle between right and six dollars a month and wrong and seventy-five dollars a day is rather a severe one.” Men poured in from Oregon, Hawaii, and South America. But it was from the East Coast that the main army of gold seekers would come, although it took nearly a year for the news to reach there. That’s why San Francisco’s football team is not called the 48ers.

It is hard for us to imagine today just how remote California was 150 years ago. The sea passage around the Horn could take more than six months and was expensive. But it was also the most comfortable and safe (at least if the weather at the Horn cooperated). The shortcut over the Isthmus of Panama reduced the sailing time to only six weeks, but people could wait for months for a ship in the fever-ridden pesthole that was Panama City. The overland journey across plains, mountains, and desert was the quickest but often the most perilous. So it was only in the late summer of 1848 that the first rumors reached the East Coast, and only on December 5, almost three months after James Marshall saw that first yellow gleam, that official news was released. That day President James K. Polk, the man most responsible for making California U.S. territory, sent Congress a message declaring the gold strike authentic. He sent along a guaranteed-to-get-your-attention piece of proof, a twenty-pound gold nugget. Only the size of a large fist, it was then worth about forty-eight hundred dollars, enough for a large family to live in comfort on for two years or more.

The result was mass hysteria. Ninety thousand people set off for California in 1849 and as many again in 1850. By the time the rush petered out a few years later, California had been transformed. Before the rush, except for a few small towns along the coast, it had been a nearly uninhabited wilderness. But only two years and three months after California became U.S. territory, it was admitted to the Union.

At the time of statehood, its population was still fully 92 percent male. That imbalance, needless to say, was quickly corrected out of existence. The subsequent history of California, since its golden beginning, both economic and demographic, is unparalleled. Its mineral wealth is more varied than that of any comparably sized area in the world, and its gold has long been supplanted as the most valuable commodity to be pulled from its earth (that is, by oil). Today, California has almost twice the population of any other state, and were it a sovereign country it would have the world’s sixth-largest economy and be a great power in its own right.

But the story of the gold rush is at least as interesting for its effect on the entire country as for that on the history of California. The California gold strike moved the country’s center of gravity sharply westward in a historical instant. As early as 1851, at the gold rush’s height, John L. B. Soule wrote in the Terre Haute Express, “Go west, young man, go west!,” a phrase quickly picked up by (and forever after attributed to) Horace Greeley.

Immediately, the country’s connections to the Pacific became a prime political issue. Where and by what means a railroad would be built to California occupied much congressional debate. The state was more than a thousand miles from Texas, the nearest state. In terms of communications it was months away from Washington, D.C. The Panama railway soon made the trip across the isthmus a quick one and, together with regular steamer service in the Pacific, reduced travel time from months to weeks. In 1860 the storied Pony Express reduced communication time to about ten days. In 1861, a telegraph line linked the West Coast directly to the rest of the country. Finally, in 1869, the Union Pacific Railroad joined California to the Union in geographic as well as political fact.

In economic terms as well, the California gold strike profoundly affected the country. It would be hard to overstate the centrality of gold to the world financial system in the middle of the nineteenth century. The Bank of England had gone on the gold standard in 1821, declaring itself ready to buy or sell unlimited amounts of pounds sterling for gold at the rate of one ounce of gold for £3.17.10½ (a ratio set more than a century earlier by Sir Isaac Newton, of all people, enjoying the perks of a largely no-show job as Master of the Mint). Because the United Kingdom dominated the world’s economy in the nineteenth century and the Bank of England was the world’s de facto central bank, all major trading nations were soon forced to follow and peg their currencies to gold.

The good thing about a gold standard is that it makes inflation impossible, for, if a country begins to create too much money, gold will begin to flow out of its treasury. But that means that, under a gold standard, the money supply is limited by the amount of gold available to back the currency.

The United States was not a major gold producer in the early nineteenth century. In 1847, a typical pre-California-gold-strike year, the United States produced only 43,000 ounces, mostly as a byproduct of base metal mining. The following year, 1848, the country turned out 484,000 ounces, thanks to California. By 1853, output was no less than 3,144,000 ounces, worth almost $65 million. (And that was a year when the federal government spent a grand total of only $48 million.)

The result of this sudden influx of gold into the American economy was a period of great prosperity and economic growth. Government revenues, a rough measure of economic activity, had been only $29 million in 1844; by 1854, they were more than $73 million. Railroads had only 9,021 miles of track in 1850; by 1860, there were 30,626 miles. Telegraph wires spread quickly. Shipping, iron smelting, and textile manufacture increased sharply. Other industries likewise expanded.

This economic development was by no means evenly distributed, however. It was disproportionately concentrated in the Northern states, where population also grew faster than in the South. As a result, when the long-dreaded Civil War began in the next decade, the relative strengths of the two sections had shifted markedly in the direction of the North.

Perhaps equally important, California gold helped fund the titanic cost of the war, while the South, necessarily trying to finance its war effort with paper, saw its economy collapse under uncontrollable inflation. Thus, while they doubtless never knew it, those hundreds of thousands who pursued their self-interest in the early 1850s by moiling for gold in the foothills of the Sierra Nevada helped mightily to save the Union in the 1860s.