Gold was first discovered in California on January 24, 1848 by James Marshall. The gold rush that ensued after Marshall’s discovery took place between1848 and 1855.
What was the California Gold Rush?
The event led to the transformation of California from a largely ranching and farming state into what would eventually become – if California was an independent country – the fifth largest economy in the world. In fact, the gold rushes in the U.S. and Australia are credited for stimulating a global economic boom in the late 1800s.
California was admitted as the thirty-first state of the United States in 1850 during the gold rush. The term “eureka” – which is derived from an ancient Greek term meaning “I have found it,” became the state motto of California in reference to this discovery of gold. The word has been included in the California State Seal since its original design in 1850.
As the story goes, Mr Marshall was employed as a carpenter to build John Sutter’s mill on the South Fork of the American river in Coloma, California on the western slope of the Sierra mountains. While on-site at the sawmill on that historic day, Marshall reached down and picked up what he knew was a gold nugget in the ditch that drains water away from the waterwheel.
He and his crew then found more gold nearby. Marshall showed the discovery to Sutter, who wanted to keep the news quiet. Ironically, Sutter’s motive was to avoid a gold rush into the region in order to protect his plans to build an agricultural empire rather than making the effort to find more gold.
Discovery of Gold in California
Prior to Marshall’s gold discovery, there were roughly only 14,000 non-Native Americans living in California. As word of the discovery leaked out, six thousand prospectors flocked to California in 1848. But by the beginning of 1849, word of the gold rush spread around the world and another ninety thousand people moved there in 1849, giving borne to the term “forty-niners” (in case you wondered why the San Francisco NFL football team adopted the nickname “49ers”).
People came from all over the world to California to look for their fortune, with many coming from China, Mexico, Europe and Australia. Of the approximately 300,000 peopled who flooded into the State during the gold rush roughly half came from overland and half from overseas. San Francisco was a tiny settlement of 200 people in 1846. But by 1852, it had “boomed” to 36,000 people.
Panning for Gold
“Mining” back then is not what we know as mining now. Gold mined by these early miners was formed by minerals deposited in rocks that came to the surface around four hundred million years ago. Water from streams carried nuggets of gold downstream and deposited them in river beds. The gravel beds became so richly concentrated, that the gold rush miners were able to retrieve flakes and nuggets in economically material quantities with pans (“panning for gold”).
Panning, however, does not enable a large-scale mining operation. Soon, groups of prospectors shifted to placer mining to speed up and increase the size of the gold extraction. Basic placer mining uses wooden troughs, called a ‘sluice box’, which is designed to use water flowing through the boxes to capture the small particles of gold that would fall out of the slurry of water and gravel flowing through the box.
Gold – the Economic Effect on California
The economic effect of the gold rush on California was enormous. Many of the early prospectors became wealthy during this period. They could often earn ten times the amount per day they would make at other jobs. It’s estimated that twelve million ounces of gold were mined during the Gold Rush time period. The hoards of people looking to strike it rich hunting for gold gave rise to new towns wherever a new gold discovery was made. This in turn spawned mercantilism and banking activities.
The California Gold Rush was followed closely by gold rushes in Oregon (1851) Colorado (1858), Idaho (1860), Nevada (1870’s), and Washington (1897). Not only did the Gold Rush transform California economically, but the various U.S. gold rushes, along with the Australian gold rush (1851) pushed the world into the gold standard.
When did the Gold Rush end?
Circling back to the person who sparked the Gold Rush, James Marshall went on to become a partner in a gold mine near Kelsey, California. But the mine was a bust, leaving Marshall close to bankruptcy. Sadly, Marshall passed away penniless in 1885.
In 1890, a monument and tomb were constructed in his honour. A statute of Marshall pointing to the place he discovered gold was placed on top of the monument, thereby immortalizing him and the significance to the State of California of his serendipitous gold discovery.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis. The views expressed in this article are those held by Dave Kranzler and not Kinesis.