The story of the California Gold Rush is one of the best known in American history. It’s quintessential to the ideals of taking advantage of opportunity and working hard to climb the economic ladder. Of course, most of those who rushed to the California gold mines went broke instead of striking it rich, but hundreds of tons of gold were uncovered over the course of the rush. What happened to it as it entered the economy?
The Gold Rush changed San Francisco almost overnight. From a little town of 850 in 1848, it grew to over 20,000 by 1850. (Native American populations, however, dropped drastically: from 150,000 in 1845, to fewer than 30,000 by 1870.) On Liberty Street Economics, James Narron and Don Morgan write, “Carrying a small amount of gold in a glass vial, Brannan strode up and down Montgomery Street in San Francisco, then just a sleepy hamlet, extolling the great wealth that could be readily plucked from the foothills outside Sacramento. A kind of madness seized the 850 residents of the city, and as the San Francisco Chronicle noted on May 29, ‘the field is left half plowed, the house half built, and everything neglected but the manufacture of shovels and pickaxes.’”
The influx of people as well as the high demand for mining supplies, drove the cost of goods up to exorbitant heights (in fact, shop owners were more likely to profit off the rush than the miners.) Only 2 years into the Gold Rush, it was cheaper to send laundry to Hawaii for cleaning than to have it done locally. Miners had to extract several ounces of gold a day simply to keep themselves supplied with food and equipment. One in twelve died, and many left. Eyewitness accounts talk about the harbor clogged with ships left to rot because the passengers and crew had all gone to the gold mines. A mercury rush a few years earlier combined with a common way of using mercury to mine gold had left many miners with brain damage and in too poor of health to leave. Despite the dire situation, individuals and mining corporations continued to pull gold out of the streams and mountains. The United States had moved from a bimetallic standard to the gold standard in 1834, and the the influx of gold from California acted like “a monetary easing by a central bank, with more gold chasing the same amount of goods and services.”
Some gold left the United States via immigrants, particularly workers from China. Some Chinese workers melted down their gold and shaped it into common household items, like pans, darkening them with soot to disguise them on the return journey. Anti-immigrant sentiment was high, and since fortune seekers from many nations poured into a city that was not prepared for them, tensions raged. The Foreign Miners Tax of 1850 called for a monthly tax of $20 on every foreign miner, a price many could not pay. (The Chinese Exclusion Act was put into place in 1882, halting immigration from China and preventing immigrants from becoming citizens. Chinese Americans were not allowed to become citizens until 1943.)
As people and gold continued to flow into California, it became a center of national and global attention, achieving statehood only 2 years after the first gold was found. As the wealth continued to flow from the mountains, the need for a local Mint was obvious. The private company Norris, Gregg & Norris produced the first coins from California gold, but shut down within a year.
John Little Moffat moved to San Francisco from New York and began an assay business, as well as producing gold bars. However, the bars did not circulate, and he realized the need for coinage. They follow the pattern of the official gold coins, but also bear the legend SMV (Standard Mint Value.) Other minting companies followed suit, but Moffat was easily the most successful. These early California gold coins are rarities, and bring excellent prices when they go up for auction. (Some of the first gold from California actually ended up in Utah, carried by Mormon troops, and was used to create currency for the Utah territory. These are also rare and bring high prices.)
In 1850, the Treasury Secretary set up an assaying authority with the power to buy gold. Seeing the success of Moffat’s company, the federal authorities brought him into the operation. A skilled watchmaker from New York, Augustus Humbert, was also brought on board and was largely responsible for the shape of the first octagonal California gold coins. Ursula Kampmann writes in Coins Weekly that “These ingots and the ‘ordinary’ US coins could circulate simultaneously, but the former were no official means of payment. The problem of these specimens was that they had too great a weight. Compared with the official 10 and 20 $ dollar coins below weight, they contained much more gold – which was a nuisance to the banks who couldn’t get rid of their own currency anymore. Consequently, they took revenge by exchanging the ingot with the too big intrinsic value with 3 % discount only. That, in turn, made the ingots become much less popular; Moffat & Co. was forced to produce their old 10 and 20 $ dollar coins instead again, this time on behalf of the US government.”
Moffat departed his company in 1852, and the firm was established as an official assay office of the United States. However, it closed late in 1853, when the new San Francisco Mint was expected to begin producing coins a few months later. Unfortunately, the mineral shipments needed to create alloys didn’t arrive in time for the Mint to keep to its original schedule, and opened in April of 1854. Just over $4 million face value in gold coins were minted during its first year of operation, making 1854 S mint gold coins rare and highly desirable to collectors and numismatists.
Over time, northern California settled down and became much like any other part of the States, with its own industries and exports. But the legend of the California Gold Rush was cemented into national memory, and the state still enjoys the golden glow of the promise of a better life.