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THE STATE ASSAY OFFICE
OF CALIFORNIA

The products of the State Assay Office were contemporaneous with the Second Series of private gold coins.  As previously stated, the law establishing this assay office was passed along with a companion bill which would have eliminated private gold coinage, had it been enforced.

The State Assay Office of California was a unique institution in our nation’s history.  It was the only mint to operate in this country under the authority of a state, after 1789.  Its issues (though never challenged in the courts) may have been illegal under the United States Constitution, which forbade any state to issue coins or currency.  These issues were the first ingots to be called “slugs,” a name later used to describe any private coin, particularly those used today in coin-operated machines.

As related earlier, gold dust was the principal circulating medium in California in 1848 and 1849, while talk constantly referred to the need for a standard medium of definite value regulated by the government.  As early as July 22, 1848, petitions for the establishment of a State Assay Office in California had been presented to Governor Mason.  With the advent of underweight private coinage, the merchants of San Francisco once again gathered to discuss how they could use the gold dust obtained by the quicksilver (amalgam) process as a circulating currency acceptable to all.

A meeting was held on March 29, 1850, to select a committee to look into this matter.  When the committee delivered its report on the 5th of April, the entire gathering drafted a resolution addressed to the State Legislature refusing to receive “California Coin” (i.e., privately struck, non-governmental coins) as currency, and praying that a State Assayer be appointed who would assay and stamp ingots stating their correct fineness, weight, and United States mint value.

The next day over 400 more San Francisco citizens signed the petition asking that the state establish a State Assay Office with authority to melt and assay gold dust and issue coins (i.e., ingots) bearing the state stamp. A state institution, so it was thought, would eliminate from circulation the various undervalued private issues, standardize the price of gold fineness, and thus restore confidence in gold coinage.  The proposal was approved by the Legislature and the act creating “the office of State Assayer, Melter, and Refiner of Gold” became law on April 20, 1850.

It was probably in anticipation of a State Assay Office that the state leaders on April 8 passed a bill forbidding the issue of any pieces of gold of less than four ounces troy weight, and the additional act of April 20 which made it mandatory for all private coiners to redeem their products at face value in U. S. coin on demand.  Although the law initially ended the first wave (1848-50 period) of private gold coiners, it was not enforced since the need for coins in excess of the State Assay Office’s production, and especially those in denominations lower than those produced by the Assay Office, immediately became apparent.

In compliance with a petition from leading citizens of San Francisco to Governor Peter Burnett, Frederick D. Kohler was appointed State Assayer.  O. P. Sutton, another former New Yorker, was appointed director of the State Assay Office.

Kohler had been associated with then State Senator David C. Broderick in an assaying and coining business (see Kohler & Co.).  It is perhaps ironic that a man presumably associated with privately issued coins worth 20 percent less than face value (see Pacific Company) was later appointed State Assayer.  But perhaps his past association was not revealed until later, if at all; the Pacific Company coins had not yet been either decried or publicly attributed to him.

The act provided that the State Assayer was to refine and assay gold dust and cast it into ingots weighing a minimum of two troy ounces.  These pieces were to bear the state name, value, weight, and carats of the ingot.  They also carried a quasi-legal status in California since the U. S. Constitution did not specifically say it was illegal for states to issue ingots.  (Article I, Section 10, United States Constitution, specifically forbids states from “coining money” and issuing currency.)  It is subject to debate whether the Constitution’s drafters intentionally excluded ingots from their prohibition.  No states were empowered to declare anything but gold and silver legal tender, which means that they were able to confirm the (national) legal tender status of gold and silver; but as the form in which the gold and silver could be tendered was nowhere specified, this loophole neatly admitted the possibility that California could declare native gold bars or coins a legal tender.  The whole operation was to be abolished upon creation of a United States provisional branch mint in California.

It can be argued, nevertheless, that the creation of the State Assay Office seems to have been a direct violation of the United States Constitution, which forbids the issuing of coins by a state (the principal difference between an ingot and a coin being their shape, not their purpose).  Perhaps because California was under a military government at the time and not admitted as a state to the Union until September 1850, the Federal Government chose to overlook this issue.  Besides, the State Assay Office was a temporary expedient until a branch mint could be approved.  In any event, no coins were issued, only ingots of more than two troy ounces.

Evidently there was some delay in starting the operation because Director Sutton doubted whether it would be as profitable a venture as he had at first expected.  He also felt that there would be time enough to start the office’s operation after the law creating the office had been publicly announced.

On the thirteenth of May 1850, the following announcement appeared in the Pacific News:

"The undersigned have opened an office in the building now occupied by Messrs. Baldwin & Co., south side of Portsmouth Square, and will be prepared to receive gold dust for smelting and assaying on Monday the 13th, in accordance with the provision of the law passed by the Legislature of the State April 20, 1850.  In making this announcement, we beg leave to state that desiring to establish an office at the earliest practicable moment, our arrangements are necessarily less complete that they otherwise would have been; nevertheless, we trust that they will be found sufficient to meet the needs of the community."

O. P. Sutton, Director
F. D. Kohler, Assayer
San Francisco, May 10, 1850

The new State Assay Office met with immediate public acceptance.  Five thousand ounces of gold were deposited the first day, and the establishment was forced to operate day and night to accommodate the rush of gold dust.

The law providing for the State Assay Office made provisions for branches in Sacramento, Stockton, and Sonora.  The officers of the State Assay Office made plans in early June to open an office in Sacramento to position themselves closer to the gold mines.

John Bigler, who later became Governor of California, was appointed director of the Sacramento operation.  Bigler’s assistant, Milton S. Latham, later served as U. S. Senator and Governor of California.  Kohler evidently also moved to Sacramento, leaving a deputy in San Francisco.  Formal announcement of the new Sacramento office, to be opened July 1 on Third Street near the corner of J Street, was made June 28, 1850.

The ingots of gold issued by the State Assay Office had their weight, fineness, and value stamped on them.  Their value ranged from $36.55 to $150.00.  The “$50 slugs” – which is what they were sometimes called at that time – were probably the most common. An account (in the Alta California for November 20, 1868) of this assaying process by a visitor to the office states: “I gazed into the Assay Office of Fred Kohler, situated on the south side of Clay Street, watching for the first time the process of converting gold dust into bars, and the clipping of the bars into $50 ingots.”  To date only one $50 ingot is known.

The account continues that “the bars of gold were cut from strips into convenient sizes.  From their appearance, it seems these cast bars were then beaten with hammers or rolled in order to make the final product of a desired uniform thickness.”  Most likely these bars were rolled into shape.

The ingots were assayed at 1 to 1 ½ percent over the value stamped on them, but certain sectors of the business community did not condone their acceptance at face value.  Gold dust had been purchased previously by bankers and dealers at below its standard value of $16 per ounce.  It was to these merchants’ advantage to hold down the price of gold locally.  The State Assay Office ingots prevented this and in retaliation, many prominent bankers refused to accept the assay ingots at par.  This shortsighted action in turn prompted a defiant announcement by several leading Sacramento merchants reaffirming their intent to honor the State Assayer’s ingots at the value stamped on the pieces, rendering the bankers’ boycott ineffectual.

The exact number of ingots issued by the State Assay Office is not known.  A statement in the Daily Transcripts of August 8, 1850, mentions that 161 deposits were made at the Sacramento branch up to that time with the total value, at $16 per troy ounce, of $59,028.80 (enough for about twelve hundred $50 ingots).  At least two such ingots are known today.  In all likelihood, almost all the ingots were soon remelted to recover their higher intrinsic value.  The State Assay Office was discontinued on January 29, 1851, with the establishment of the United States Assay Office, which began operations February 1, upon the repeal of the act creating the State Office. 

While working at the State Assay Office, Assayer Kohler carried on his duties as chief engineer of the Fire Department until he resigned from the Fire Department on August 26, 1850.  After the close of the State Assay Office, Kohler evidently moved back from Sacramento to San Francisco to work with private coiners Wass, Molitor & Co., for the following advertisement appeared in the Alta Californiaon July 24, 1853:

U. S. ASSAY OFFICE
FREDERICK S. KOHLER
United States Assayer Office – at Wass, Molitor & Co.’s
Jy 24                Merchant St.

This interesting statement is suspect since nowhere else is the suggestion of Kohler being a United States Assayer corroborated.  Also intriguing is the fact that this advertisement appeared just two days before the official dissolution of Curtis, Perry & Wards’ State Assay Office.  What Kohler was doing from January 1851 until July 1853, and why he called himself United States Assayer, remains a mystery.

--Reprinted with permission of the author from Donald H. Kagin's, "Private Gold Coins and Patterns of the United States", copyright 1981, Arco Publishing, Inc. of New York.

Sources and/or recommended reading:
"Private Gold Coins and Patterns of the United States" by Donald H. Kagin