BC Gold Rush Q&A

How did the BC Gold Rush begin? Who found gold first and where?

Gold Mountain

As you travel along the roads in British Columbia, you will notice some very interesting layers of exposed rock on the sides of cliffs and mountains. You may wonder, why are there marine fossils so far inland and how did limestone that dates from the ancient North American continent get above a layer of newer rocks?

Canada’s west coast was somewhere around present day Calgary about 200 million years ago. All of the terrain formations that make up British Columbia have been added to North America’s west coast since that time. Oceanic plates under the Pacific Ocean collided with the North American continent as it pushed northwest. Blocks of oceanic or continental crust were forced to the surface. These blocks of added crust are referred to as terranes and gradually they added to the continent little by little. British Columbia is made up of 22 identified terranes.[i]

The persistent movement of the plates forced the upward thrust along the length of the terranes and mountain ranges began to form. Thousands of minerals were pushed through the cracks of these mountains. Among these minerals were dull yellow stringers, we now call gold.

Rivers of Gold

About 2 million years ago, a series of ice ages began. This period of time is known as the Pleistocene Epoch. Tropical ocean currents became blocked by drifting continents and then polar currents were able to push north from Antarctica. By this time, the North American continent, was pushing northwest, closer to the North Pole. Cooler weather prevailed, snow accumulated and thick snow packs didn’t melt. These thick snow packs became ice and then glaciers.

These glaciers were like slow moving oceans; re-working and changing the landscape, carving valleys between mountains, crushing and grinding rocks into sediment. Sediment was pushed along and deposited as the glaciers melted.

As the glaciers began to retreat, further erosion happened with all the melt water. Huge chunks of ice acted as dams and melt water flooded plains which found its way into adjacent river systems.

The sediment that made its way down the rivers contained gold.

Why did people search for gold?

Gold and silver were used and traded as currency.  By the 1800’s, both Britain and the United States did business in gold and silver coin. The value of the coin was based solely on the value of the metal within. In 1816 England officially abandoned bimetallism and made silver coins into tokens of limited legal value.

The panic of 1857

Alarms were sounded following the end of the Crimean War in 1856, when Russia’s dependence on American crops ended with the return of Russian soldiers to their farms. Weaker grain prices discouraged immigration to agricultural regions of the United States, and land prices began to fall.  Railroad and land speculators who had made enormous profits in the first half of the decade left prominent securities dealers holding large quantities of bonds and other securities.

A bank regulation of June 1857 restricted the discount rate which city banks could charge, and limited the amount of notes that could be returned to peripheral (country) banks without sufficient notice. This regulation, along with rising bank risk, caused a flood of peripheral banks’ notes into the city for redemption. Railroad securities continued to fall.

As city banks’ gold reserves fell in response to the accelerating demand for redemption of peripheral banks’ notes, the city banks refused to rollover the debt of the brokers. Brokers became bankrupt as they tried to sell their bond holdings at rock bottom prices. This in turn made people question the solvency of several New York City banks that had made loans to brokers and dealers backed by bonds.[ii]

On the morning of August 24, 1857, the New York branch of the Ohio Life Insurance and Trust Company announced that the bank had failed and closed its doors. Within hours of Ohio Life’s failure, other New York banks closed, sending public distrust and loss of confidence soaring.

Ship of Gold Sinks

In September, 1857, the steamer Central America, loaded with $2 million in Californian gold and headed for New York to renew the dwindling gold reserves of the eastern U.S. banks, sank during a hurricane off the coast of North Carolina. The shipment had been needed to maintain the ratio between deposits and gold in the banks. The toll of human lives and the catastrophic loss of largely uninsured gold further undermined public confidence in the banking system. The panic was followed by an economic depression.[iii]

 

The Rush for Gold on the Fraser River!

News of gold discovered on the Fraser River in 1858 prompted a mass exodus from California, Oregon and Washington. Motivated and sometimes desperate, thirty thousand gold seekers risked everything they had to make their way up the Fraser River to a large un-mapped area north of the 49th parallel controlled by the Hudson’s Bay Company.[iv]  In a short time, towns were built, and the new colony called British Columbia was declared. The terrain proved very challenging but still the gold seekers pushed north where they found more gold in the region called Cariboo.

Abundance of Gold and the Shortage of Money

At the time the new colony of British Columbia did not have its own currency and would not accept gold for payment on duties and licence fees.

Governor James Douglas, in a despatch to the Colonial Secretary dated November 1861:

“Much inconvenience and loss have, ever since the formation of these colonies, been occasioned by the want of a circulating medium of fixed and recognized value, equal to the business demands of the country. The scarcity of coin has been so great, gold-dust not being received for duties, that importers of goods have found it difficult at all times to make their custom-house payments, and, as is well known, are frequently compelled to borrow money for that purpose, at exorbitant rates of interest, from two percent, per month, and upwards.

Almost all the business of the country is transacted in gold-dust of uncertain value, and it is easy to conceive the difficulty and inconvenience of adjusting payments by such means, when the holder and receiver are both alike subject to loss, and fearful imposition.”

The scarcity of English banknotes in the colony increased the banking fees to five percent for exchanging gold dust into currency. Gold miners realized that they could get a better rate south of the border.

“The effects of an over-restricted monetary circulation are now, however, operating so fatally in both colonies, that it is indispensable to provide a remedy for an evil that is sapping the very foundations of our prosperity. To illustrate this fact, I would inform your Grace that at this moment there is an amount of gold dust in the hands of miners from Cariboo, residing at Victoria, exceeding one quarter of a million sterling, and so great is the present dearth of coin that it brings a premium of five per cent, and over when procurable, which is not generally the case, as men may be seen hawking bars of gold about the streets of Victoria who cannot raise coin enough, even at the high rates of discount just mentioned, to defray their current expenses.

“The miners and other holders of gold are naturally incensed, and refuse to submit to this depreciation on the value of their property when they know it can be converted into coin for the moderate charge of one half of one percent, at the United States Branch Mint in San Francisco, making an important saving to them of four and a half percent. They are consequently leaving Victoria at every opportunity, and it is most painful to witness a state of things which is rapidly driving population and capital from the country.

“As a safer remedy, and one more suitable to the actual circumstances to the colonies, I propose to take immediate steps for the manufacture of gold pieces equal in value to the ten and twenty dollar American coins, and to bring them into general use, as a circulating medium in both colonies.”[v]

Douglas proposed that the colony make its own money and that the coin pieces could be prepared by the Government Assay Office.

This led to the establishment of the British Columbia Mint. A new company was started called the British Columbia and Vancouver’s Island Banking and Gold Trading company.

Banknotes in the Colony

Macdonald Bank was the first bank established in Victoria and it was the first bank west of the Great Lakes. Alexander Davidson Macdonald, originally from Scotland, came north from California in 1858 and noted the absence of any banking house in Victoria or on the mainland. The only institution then offering any bank services was Wells Fargo which was shipping gold to San Francisco and offering drafts for sale.

The Bank of British North America, a chartered bank based in England, opened several months later on July 1, 1859 focused on becoming the bankers for the colony. They also issued the first banknotes which gained a good circulation due to the bank’s solid reputation. In time, banknotes came to be preferred.

The Bank of British Columbia, another British chartered bank, opened in mid-1862, took a major share in the gold trade, cutting Macdonald & Company out of the field.

In 1863, Macdonald Bank issued its own banknotes in denominations of $1, $5 and $10. Most of those issued appeared to have been put into circulation at its bank in Richfield, a town that had sprung up in the Cariboo gold rush. These notes were brought to the attention of the government by the manager of the Bank of British Columbia in November 1863 by letter which stated,

“I have the honour to inform you that a Note has been presented at this Bank of payment, purporting to be a $1 Bank Note issued at Williams’ Creek by Macdonald and Co., Bankers and dated Victoria Vancouver Island… I would respectfully wish to point out to his Excellency that the issue of Bank Notes by private Bankers whatever their Capital may be, is detrimental to the interests of Chartered Banks, and is fraught with the greatest danger to the whole Community. I consider it my duty to lay the matter respectfully before his Excellency, and I will be glad to learn what steps can be taken to put a stop so dangerous a precedent.”

In response, two bills were passed on July 7, 1864; Bank Note Act 1864 and Banking Act 1864. The Bank Note Act restricted the issue of notes to chartered banks after March 1, 1865.

Coincidentally, a burglary occurred at Macdonald Bank just before a large shipment of gold coins and banknotes was to be sent to its Richfield branch. When news of the burglary reached the Cariboo, there was a run at the bank which was unable to fulfill its obligations. A few months later, Macdonald Bank collapsed.[vi]

The Token Period

The first Dominion of Canada coins were issued in 1870 and were not readily available until the 1900s. In the meantime, people used tokens made of wood or metal for a shown value issued by merchants. Tokens were commonly used in saloons, hotels, and bakeries.

 


[i] Richard Cannings, Sydney Cannings, British Columbia: A Natural History (Vancouver: Greystone, 1996), 12-15.

[ii] Charles W. Calomiris and Larry Schweikart, The Panic of 1857: Origins, Transmission, and Containment, The Journal of Economic History (1991) 51: 807-834

[iii] George Brown Tindall and David E. Shi, eds., America: A Narrative History, 5th ed., Vol. 1 (New York: W. W. Norton and Company, 1999), 707-708.

[iv] Daniel Marshall, “Claiming the Land: Indians, Goldseekers, and the Rush to British Columbia” (PhD thesis, UBC, 2000), 1-2

[v] The colonial despatches of Vancouver Island and British Columbia 1846-1871 http://bcgenesis.uvic.ca/index.htm

[vi] Ronald Greene, Macdonald & Company, Bankers Journal of the British Columbia Historical Federation Vol.40 No. 4