New York Gold Exchange

New York Gold Exchange
Formation	1864
Dissolution	1897
Type	Market
Legal status	Defunct
Headquarters	New York
Key people	Henry Martyn Benedict; Thomas P. Akers; James B. Colgate
Affiliations	New York Gold Exchange Bank; Bank of the State of New York

The New York Gold Exchange was a New York City-based market for trading in gold, incorporated in 1864 to facilitate gold speculation that was restricted on the New York Stock Exchange during the Civil War. From 1866, transactions of the exchange were settled through the New York Gold Exchange Bank, and from 1878 through the Bank of the State of New York.

Background

Prior to the incorporation of the exchange, gold speculators on Wall Street during the first years of the U.S. Civil War conducted their trading through an informal street market on William Street, near Exchange Place, and also at Gilpin's News Room, on the southeast corner of William and Exchange. These street traders sought to profit from the decrease in the value of Demand Notes and Legal Tender Notes (a.k.a. United States Notes), the paper monies issued by the United States Federal government during the war (both being referred to colloquially as greenbacks), against the price of gold, or vice-versa, an activity that was lucrative enough to sustain a formal exchange by 1864, despite protestations that such speculation was unpatriotic.

N.Y. Gold Exchange

Civil War Era (1864-1865)

• "Trading in Gold", The New York Stock Exchange, New York: Stock Exchange Historical Co., 1905, https://archive.org/details/newyorkstockexch01unse/page/152/mode/1up 
  

  On October 1, 1864, the gold brokers removed to a room at the north-east corner of William and Beaver streets, which E. O. Read and John Bloodgood had leased. The lessees charged $200 a year for admission to the chamber. On October 14th the holders of the “Read and Bloodgood” tickets organized under the title of the New York Gold Exchange. Outsiders who were elected paid an initiation fee of $200, which was eventually raised to $2,500, the fee for broker’s clerks being $1,500. The first officers were: Henry M. Benedict, president; Thomas P. Akers, first vice-president; Randall H. Foote, second vice-president; Joseph Win Moses, secretary; Theodore Gentil, treasurer; S. S. Laws, moderator. Mr. Akers had been a member of Congress from Tennessee, and at one time was a Methodist preacher, noted for zeal and eloquence. He possessed a powerful physique, and a contemporary narrator tells us that he used to amuse the Gold Room a few years later, whenever trading was dull, “by taking a fair-sized man lightly on the palm of his hand and holding him at arm’s length,” while he himself remained seated in his chair.

  The fall of 1864 and the succeeding winter were busy with gold speculation of a startling character. New operators added themselves to the market. Fluctuations in the price of gold were violent, and a few men cleared large fortunes. William L. Hoblitzel sold $1,000,000 in a single block in September, and covered at great profit. E. A. Corey was noted for his successful bear campaigns. John M. Tobin, a financial ally of Commodore Vanderbilt, Charles Kearney, S. T. Suit, and Dr. Shelton, were among the keenest traders in the metal. The Gold Exchange fixed its office hours at from 10 o’clock in the morning to 3 in the afternoon. The closing hour was frequently altered afterward, and members dealt when they pleased. Deliveries were made at first in bags of coin, each containing $5,000. The average messenger could carry two of these bags, and a strong man could handle four. It was an awkward method of delivery and a hazardous one. Upon a certain occasion, long remembered by the witnesses, the bag which a messenger was carrying burst and a wealth of yellow metal poured down into the street. Not a single coin was lost. The brokers who chanced to be at hand formed a ring about the embarrassed carrier and he was able to get together the entire amount of his freight.

  The danger of robberies and the frequency of delayed deliveries — for the supply of gold was small in proportion to the volume of speculation — demanded some sort of reform. The Gold Exchange enacted a penalty of one-quarter of one per cent, for failure to deliver at 2:15 p. m. In December, 1864, the Bank of New York, opened gold accounts. Any one who paid a bonus of $1,000 for the privilege might deposit gold with the bank and draw against it by means of a special check, across the face of which the word “Gold” was emblazoned in bronze letters of old English type. These checks, when bearing the signature of the drawer and the certifications of the bank officers, were good deliveries in the Gold Exchange, and were also available as collateral for loans. The spectacle of messengers laden with sacks of the yellow metal disappeared once and for all.

  In March, 1865, Congress taxed all sales of gold one-tenth of one per cent., afterward reducing the tax to one-hundredth of one per cent. Revenue stamps, pasted on the sales tickets, were the means of payment. Dealing in the metal was now at its height, and ten per cent, fluctuations in a single day caused no amazement. An indicator which showed the public each price at which a new transaction was made had looked out on William Street, when Gilpin’s news room was the theatre of action, and, when the change to the room at William and Beaver streets was made, this useful institution was retained. It was the practice of a crowd of hangers-on in the street to bet on the prospective gyrations of the indicator. One of these was accustomed to hold an occasional cock fight in his office after the hours of trading were over for the day, and, by dint of a little shrewd gambling on the birds, could recoup himself for losses incurred in vain attempts to prognosticate the values of greenbacks. The Gold Exchange took a lease of the premises at Nos. 12, 14, and 16 New Street, with an approach through No. 14 Broad Street, on May 1, 1865, but did not occupy the place until August, as alterations of an extensive sort were necessary to make it suitable. The rental was fixed at $25,000 a year for the first five years. For the second five years it was to be $16,000 annually, the Gold Exchange apparently believing that speculation in the metal was likely either to cease between 1870 and 1875 — in which case the members would have to sublet their quarters — or so to dwindle, at any rate, as to make it impracticable to pay as large a sum as they could afford to pay in 1865.

Post-War Era (1865-1869)

Following defeat of the Confederacy, the New York Gold Exchange became part of the New York Stock Exchange.

Black Friday (1869)

An attempt by Jay Gould and his partners, the Gold Ring conspirators, to corner the American gold market took place primarily on the exchange during the trading hours of 24 September 1869, an event that saw the price of gold spike from $145 USD to $162.5 (+11.38%) before falling to $133 (-19.96%) by the end of the day. The volatility spread across the market in the days that followed, causing a national financial panic.