The New York Gold Exchange was an exchange formed shortly after the beginning of the

American Civil War The American Civil War (April 12, 1861 – May 26, 1865; also known by Names of the American Civil War, other names) was a civil war in the United States. It was fought between the Union (American Civil War), Union ("the North") and t ...

for the purpose of creating an open market for transactions involving

gold Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile ...

and the government-created paper currency, the greenback. Established in 1862, it closed in 1897.

History

During Civil War

The exchange was established in 1862 in a basement on New Street.George Winslow, "New York Gold Market" in '' The Encyclopedia of New York City'' (2d ed.: eds. Kenneth T. Jackson, Lisa Keller & Nancy Flood). The exchange was created during the

, when the Union issued paper money to fund the war effort. Gold trading was initially banned at the

New York Stock Exchange The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District of Lower Manhattan in New York City. It is by far the world's largest stock exchange by market capitalization of its liste ...

, which viewed the practice as unpatriotic

speculation In finance, speculation is the purchase of an asset (a commodity, goods, or real estate) with the hope that it will become more valuable shortly. (It can also refer to short sales in which the speculator hopes for a decline in value.) Many ...

in wartime.Edwin G. Burrows & Mike Wallace, ''Gotham: A History of New York City to 1898'' (Oxford University Press, pp. 900–01. This was because Confederate victories resulted in an increase in the price of gold relative to the greenback dollar, causing gold traders to sing "

Dixie Dixie, also known as Dixieland or Dixie's Land, is a nickname for all or part of the Southern United States. While there is no official definition of this region (and the included areas shift over the years), or the extent of the area it cove ...

" in the Exchange when they received news of a Confederate victory.

Abraham Lincoln Abraham Lincoln ( ; February 12, 1809 – April 15, 1865) was an American lawyer, politician, and statesman who served as the 16th president of the United States from 1861 until his assassination in 1865. Lincoln led the nation throu ...

at one point publicly expressed the wish that "every one of them he gold speculatorshad his devilish head shot off." John Steele Gordon, ''An Empire of Wealth: The Epic History of American Economic Power'' (2004; Harper Perennial ed. 2005), pp. 197–99. The banishment of gold trading from the New York Stock Exchange "barely halted the trade for an instant" as gold traders relocated to various basements on

Wall Street Wall Street is an eight-block-long street in the Financial District of Lower Manhattan in New York City. It runs between Broadway in the west to South Street and the East River in the east. The term "Wall Street" has become a metonym for ...

, William Street, and Broad Street. Trading moved successively from "an ill-lit den called the Coal Hole" to Gilpin's News Room, also called Gilpin's Gold Room. It is unclear who Gilpin was. On June 17, 1864,

Congress A congress is a formal meeting of the representatives of different countries, constituent states, organizations, trade unions, political parties, or other groups. The term originated in Late Middle English to denote an encounter (meeting of ...

, angered by the speculation, passed an act prohibiting gold trades anywhere except for brokers' offices. This briefly shut down the exchange, but unregulated street transactions continued. Speculation was not stymied, and the price of gold relative to greenbacks rose. Congress repealed the law two weeks later. Gilpin's reopened under the name "New York Gold Exchange" the same year, and was incorporated on October 14, 1864.Robert Sobel, ''The Curbstone Brokers: The Origins of the American Stock Exchange'' (1970: Bread Books ed., 2000), p. 35. The New York Gold Exchange's new facility, located at the corner of William Street and Exchange Place, was usually known simply as the Gold Room.Robert Sobel,
The Big Board: A History of the New York Stock Market
' (1965; Beard Book ed. 2000), pp. 75–76. The lavishly appointed exchange "anticipated the dawning

Gilded Age In United States history, the Gilded Age was an era extending roughly from 1877 to 1900, which was sandwiched between the Reconstruction era and the Progressive Era. It was a time of rapid economic growth, especially in the Northern and Wes ...

." The businessman James Boorman Colgate was a founder and president of the New York Gold Exchange. Other founders of the Gold Exchange included

Levi P. Morton Levi Parsons Morton (May 16, 1824 – May 16, 1920) was the 22nd vice president of the United States from 1889 to 1893. He also served as United States ambassador to France, as a U.S. representative from New York, and as the 31st Governor of New ...

, a youthful

J. P. Morgan John Pierpont Morgan Sr. (April 17, 1837 – March 31, 1913) was an American financier and investment banker who dominated corporate finance on Wall Street throughout the Gilded Age. As the head of the banking firm that ultimately became known ...

, and other Wall Street figures.

Samuel Spahr Laws Samuel Spahr Laws (March 23, 1824 – January 9, 1921) was an American minister, professor, physician, college president, businessman and inventor best known today as the inventor of the Laws Gold Indicator, a predecessor of the ticker tape machi ...

, a manager of the Gold Exchange, invented the Laws Gold Indicator (a predecessor to the

ticker tape machine Ticker tape was the earliest electrical dedicated financial communications medium, transmitting stock price information over telegraph lines, in use from around 1870 through 1970. It consisted of a paper strip that ran through a machine called a ...

) to display the current price of gold to both traders on the exchange floor and the public on the street. The annual membership fee was $25, although this was quickly raised to $200, then $1,000, and ultimately to $2,500. Gold trading was significant for the U.S.'s foreign trade, but the majority of trading on the Exchange was speculative. Historian John Steele Gordon notes that "hundreds of pure speculators" traded at Gilpin's, but that "respectable merchants who needed gold for business purposes or to

hedge A hedge or hedgerow is a line of closely spaced shrubs and sometimes trees, planted and trained to form a barrier or to mark the boundary of an area, such as between neighbouring properties. Hedges that are used to separate a road from adjoi ...

against fluctuations in the price of greenbacks" also traded there. Business historian

Robert Sobel Robert Sobel (February 19, 1931 – June 2, 1999) was an American professor of history at Hofstra University and a well-known and prolific writer of business histories. Biography Sobel was born in the Bronx, in New York City, New York. He c ...

has called the gold exchange "the most informal and certainly the wildest market in American history" because of its wild profit and loss swings, its high rate of

bankruptcy Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debto ...

and frequent occurrences of "short-changing, adulteration, and late delivery" of gold. After a series of robberies of gold, brokers at the exchange set up a system of private certificates which could be drawn upon deposits at the

Bank of New York The Bank of New York Mellon Corporation, commonly known as BNY Mellon, is an American investment banking services holding company headquartered in New York City. BNY Mellon was formed from the merger of The Bank of New York and the Mellon Finan ...

. As a result of the arrangement, the Bank of New York became the second-largest holder of gold in the nation, after the

U.S. federal government The federal government of the United States (U.S. federal government or U.S. government) is the national government of the United States, a federal republic located primarily in North America, composed of 50 states, a city within a f ...

. In 1865, however, Edward "E. B." Ketchum of Ketchum, Son & Co. forged more than $1.5 million certificates and then fled; this and other such episodes prompted the establishment of a Gold Exchange Bank, with daily account reserve statements and other anti-fraud measures.

Post–Civil War

The New York Gold Exchange became part of the New York Stock Exchange in 1865. The Gold Exchange was the locus of the Black Friday financial panic of 1869, which occurred after Jay Gould and James Fisk attempted to

corner the market In finance, cornering the market consists of obtaining sufficient control of a particular stock, commodity, or other asset in an attempt to manipulate the market price. One definition of cornering a market is "having the greatest market share in a ...

on gold. In the ensuing litigation—heard before Judge Albert Cardozo— David Dudley Field represented Fisk, while Clarence Armstrong Seward and Charles M. Da Costa represented the New York Stock Exchange and New York Gold Exchange.Robert T. Swaine,
The Cravath Firm and Its Predecessors, 1819–1947
' (Vol. 1: 1946, Lawbook Exchange ed., 2007), p. 262. Gold trading became less profitable as the stock market became more

stable A stable is a building in which livestock, especially horses, are kept. It most commonly means a building that is divided into separate stalls for individual animals and livestock. There are many different types of stables in use today; the ...

, and the Exchange stopped operating on January 1, 1897, after specie resumption.

References

{{Coord, 40.7057, -74.0098, type:landmark_globe:earth_region:US-NY, display=title 1862 establishments in New York (state) 1897 disestablishments in New York (state) 1897 in New York City 1860s in New York City 19th century in Manhattan Financial services companies based in New York City New York Stock Exchange Gold investments Former stock exchanges in the United States Gold industry

History

During Civil War

Post–Civil War

See also

References