This day in history: September 24, 1869

The great gold conspiracy

“During the whole day the Gold Room was the arena of an uproar that could only find its parallel in previous scenes of a similar kind in the same locality,” a reporter covering Wall Street wrote in the New York Times on September 24, 1869. “The bear party at times seemed to be perfectly frantic while undergoing punishment at the hands of the exultant and defiant bulls; and, as the roar of battle and the screams of the victims resounded through the New Street, it seemed as though human nature was undergoing torments worse than any that Dante ever witnessed in hell.”

Reporters in the Gilded Age were prone to the same sort of exaggerations found in social media a century and a half later, and for the same reason: they were competing for eyeballs. But Wall Street in that day was indeed a tumultuous place, and no corner of the neighborhood was more tumultuous than the Gold Room, where people who needed gold to fulfill contracts made bids to those with gold to sell. Gold being gold, and greed being greed, the Gold Room also became the site of intense speculation, where gold bulls, who had bet on the gold price to rise, battled gold bears, who had wagered on the price to fall.

The bears were in the more precarious position. While the bulls could lose all of what they had paid for gold, they could lose no more than that, because the gold price would never fall below zero. By contrast, the bears could lose an unlimited amount, since there was no maximum price for gold (or any other commodity). Hence the franticness of the bears on this uproarious day.

What the bears didn’t know, and neither did the bulls, was that a single intelligence lay behind the movements in the gold price. Jay Gould cut no public figure anyone noticed, unlike the arrogant Cornelius Vanderbilt or the egregious Jim Fisk. Gould might have been a bookkeeper or a scrivener, if appearances made the man. His black beard hid much of his face, possibly as a deliberate disguise, lest his expressions reveal his intentions.

Gould sought nothing less than a corner of the gold market. A corner occurred when one person or syndicate controlled enough of a commodity to dictate its price to those who had contracted to deliver it to purchasers; those caught in the corner had no way out besides paying what the cornerer demanded. Corners had been attempted, with some success, in mundane commodities like coffee beans and pork bellies. The efforts had upset small parts of the financial markets momentarily. But no one had tried to corner gold, the commodity by which all other commodities were measured.

Gould planned his attack carefully. He enlisted brokers to purchase gold for fictitious buyers, without telling them his purpose or letting any of them know about the others. His aim was to create the impression of a broad surge for gold. He initially kept his scheme secret from Jim Fisk, his partner in other ventures. After Fisk, who was smarter than he looked, figured out that Gould was up to something, Gould brought him aboard, but only partially.

Most crucially, Gould quietly lobbied President Ulysses Grant to keep the government out of the gold market. Grant wasn’t inclined to intervene, and he publicly said so. But Gould worried that those caught by the corner would plead with Grant to break it by flooding the market with government gold.

Gould planted spies close to Grant, to give warning in case the president changed his mind. He persuaded Grant’s brother-in-law, Abel Corbin, to keep his ear to the door of the president’s office, in exchange for a share of Gould’s profits. In the delicate operation Gould had undertaken, even a moment’s advance notice could spell the difference between triumph and disaster.

During the first weeks of September the plan unfolded as Gould hoped. He acquired more and more of the gold supply, yet no one caught wind that he was the person pulling the strings of the various gold purchasers. To most observers, the rising demand for gold seemed in keeping with ordinary market operations.

But then Abel Corbin got cold feet. Corbin learned that Grant was watching the gold market more closely than before; Corbin concluded that Grant had decided not to leave the market to its own devices. The president was preparing to stabilize gold by putting the Treasury’s supply in play. Corbin told Gould he wanted out of their deal.

Gould reckoned that the game was up. He would abandon the corner. Yet he would do so as quietly as he had conceived it. He didn’t tell Jim Fisk about the change of plans. He let Fisk continue to purchase gold, even as he, Gould, began to sell.

September 24 was a Friday. Early bidders pushed the price of gold up from 143 to 150 before the Gold Room officially opened at ten o’clock. Fisk led the charge. “Take all that you can get!” he shouted, at the 150 mark. The price instantly jumped to to 155. Fisk bellowed, “Take all you can get at 160.”

As Fisk and the bulls bid the price up, the bears were in agony. “It was a desperate battle between two hosts of gamblers, whose minds were quickened by incessant plots, whose hearts were cold and their greed rapacious,” declared an eyewitness. “Gold, Gold, Gold was the cry.” The price reached 162.

And then, without warning, the market collapsed. Word arrived that the Treasury was opening its vaults and selling gold. “Possibly no avalanche ever swept with more terrible violence,” the New York Herald reported. “As the bells of Trinity”—the church closest to the Gold Room—“pealed forth the hour of noon, the gold on the indicator stood at 160. Just a moment later, and before the echoes died away, gold fell to 138.”

The plummeting price saved the bears. But it put the bulls in peril. Most had bought their gold with borrowed money, collateralized by the gold itself. As the value of the collateral diminished, the bulls’ creditors demanded more cash, which the bulls didn’t have. Now they were the ones facing ruin.

They blamed Jim Fisk, who seemed to have led them astray. And they assumed that his partner Jay Gould must have been involved as well. They cursed the two men; some threatened violence. Fisk made a quick exit from Gold Room and went into hiding. It was a good thing he did, said an impartial observer. “The chances were that the lamp-post near by would have very soon been decorated with a breathless body.”

That day became known as Black Friday, the first of several days with the “black” label, signifying dark times on Wall Street. (A century would pass before “Black Friday” acquired a positive connotation, as the day after Thanksgiving when retailers hoped to make lots of money and be “in the black”—turn a profit.)

Gould’s gold conspiracy triggered investigations and prompted changes in laws to prevent such shenanigans in the future. Most of what he had done was legal when he did it; much of it was made illegal.

Perhaps surprisingly, the Gould-Fisk relationship survived Gould’s failure to tell his partner he was changing course and, in effect, double-crossing him. Possibly Gould compensated Fisk for the latter’s losses. In any event, Fisk recognized that in times of severe distress, speculators had to fend for themselves. “It was each man drag out his own corpse,” he said.