When the territory came under the Stars and Stripes, Sutter swore allegiance to the flag and anglicized his name, becoming John Augustus Sutter. By 1847 his colony had developed wonderfully. He had a thousand acres of land growing wheat; he owned 8,000 head of cattle, 2,000 horses and mules, 2,000 sheep and 1,000 hogs.
Commodore Stockton had confirmed him as alcalde, or justice of the peace, and General Kearney later made him Indian Agent. He had now come to the point where it became necessary to have a flour mill for the colony, and that a flour mill might be built, a saw-mill was necessary, to prepare timbers, planks and boards. The machinery for these mills had been recently brought to the fort in 1844 by the ship Lexington.
Among the immigrants that came to the fort in 1844 was a man from New Jersey named James Wilson Marshall, a millwright by trade. He worked for Sutter for a time, but being taken with an attack of land-hunger, he undertook to work land of his own. Tiring of that, he came back to Sutter in 1847, when the necessity for the mills became so urgent. They formed a partnership in the saw-mill, and Marshall, with two white men and an Indian guide, left the fort on May 16, 1847, to search for a site and build the saw-mill. He found a place on the south fork of the American river, about forty-five miles from the fort, adjacent to timber, that he thought suitable. This place now bears the name of Coloma. Work on the mill and dam was at once begun, and in January of the following year the mill and dam had been constructed, and they were at work on the tail-race that was to lead the water, after it had done its work on the wheel, back to the river.
Marshall found conditions such that considerable time and labor could be saved by simply loosening up the earth with a pick and by turning on the water washing it out into the river.
On the afternoon of January 24, while directing this operation and walking along on the bank of the tail-race, his eye was attracted by some yellow specks that glittered in the sunlight. At first he took little notice of them, till seeing still more of them, the thought flashed through his mind—“Can these be gold?” He picked up a piece larger than the rest and examined it. He had never seen gold in its native state, but understood in a general way that it was heavier than lead and that it was a soft, not a brittle metal. He weighed it in his hands, bit it with his teeth, then laid it on a rock and pounded it with a smaller stone, and found that he could mash it a little. Being of a morose disposition, he became very thoughtful, and as he sat at supper with his mates he scarcely spoke a word; but at last he quietly remarked: “Boys, I think I have found a gold mine.” One of the men spoke up and said, “I reckon not—no such luck for us.”
He could not dismiss it from his mind, and was up betimes in the morning, again looking over the tail-race, and found more of the yellow particles. The thought that it might be gold thrilled him. He and his men picked up about four ounces of the yellow stuff, and Mrs. Wimmer, the camp cook, boiled them, which only made them brighter. This more and more convinced Marshall that they were gold. He begged his men to go on with the work and say nothing about it. On the morning of January 28 he mounted his horse and started for the fort, where he arrived early in the afternoon. He was covered with mud, for he had ridden hard, and it was raining so that he was wet to the skin, and he was very much excited. Walking into Sutter’s office, he at once asked for a private interview. Whispering that the doors must be locked, this rather alarmed Sutter. Marshall then announced that he was sure he had found gold, and taking a little bag from his pocket he dumped his few ounces of nuggets on the table. Incredulous at first, Sutter soon became convinced that this was gold, especially after he had tested them with acid, and bringing from his drug store a small pair of scales, he put some silver coins in one of the saucers, and balancing them with gold in the other, he lowered them into a basin of water. When the yellow metal dropped lower than the silver coins, he knew for sure that they were gold.
So excited was Marshall that though Sutter urged him to stay at the fort till the next morning, cold and wet as he was, he returned to the mill the same night, hardly taking time to eat a bit of supper. The next morning he was back on the road to meet Sutter, who had agreed to come then. They spent two days together looking the ground over and trying to decide what was the best thing to do.
Gold they found everywhere they looked for it, along the river. Marshall’s chief anxiety was to secure for themselves all the rights to the gold in the ground to which they might be entitled. Sutter’s viewpoint was somewhat different. He had developed a very valuable agricultural property, and at this time owned 12,000 head of cattle, 2,000 horses and mules, 10,000 to 15,000 sheep, and 1,000 hogs; he had grown during the past year 20,000 bushels of wheat, and had several thousand hides in process of tanning or waiting to be tanned. Then there were the two unfinished mills. He at once saw that if his men once broke away from him and went after the gold his mills would never be finished, and they were now more than ever absolutely necessary. So he decided to try and keep the whole matter secret, at least until the mills were finished, and he pledged his men to stay on the job and say nothing about the gold for the next six weeks. He thought that he could easily keep them isolated for that time. He also took the precaution of obtaining from the Indians living in the district the exclusive use of their lands for all or any purpose, for himself and Marshall, for the next three years, the tract consisting of twelve miles square.
The excitement within the camp increased daily. One of the men, Bilger by name, had been assigned the duty of occasionally going along the river and its tributaries, to shoot deer and ducks, to give variety to the bill of fare. He always brought back with him specimens of gold that he easily found wherever he searched for it in the streams. Sutter himself became more and more uneasy as the weeks passed. His title to the land grant given him by the Mexican Government had not been confirmed by the United States authorities, that had so recently come into control of the new territory. There had not been time for such detail. At last he decided to send one of his trusted assistants, one Charles Bennett, to Monterey, to see the Acting Governor, Mason, and ask him to make a special grant, or at least give him and his partner exclusive milling and mining rights and privileges on the land they were developing. Mason had no power or authority to make such a grant. Bennett, though strictly enjoined to say nothing about the gold find, let the secret slip.
About the same time, supplies were needed at the saw-mill, and a teamster whom Sutter thought he could trust was sent with them. He, of course, heard from the workmen at the mill about the finding of gold, and being very incredulous, was given a few small nuggets to convince him. Returning to the fort, and still doubtful of the value of the yellow stuff he had gotten from the men at the saw-mill, the idea occurred to him that a good way to test the matter was to try to trade it for whiskey, so he offered his few pieces of yellow metal at the store that had been recently opened at New Helvetta by Smith & Brannan. Smith, to whom he offered the gold, though distrustful of its being gold, made the trade. The whiskey loosened the teamster’s tongue, and the secret was out. This was about a week before the six weeks of agreed secrecy had expired.