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With the discovery of gold in eastern Oregon and Idaho, hostle Indians had a field day. Never attacking settlements or reasonably fortified ranches, the Indians preyed upon small bands of travelers and stole wandering livestock. Their activities were frequent enough, however, to arouse fear in the growing white population. In response to a growing public clamor, a campaign was started in the winter of 1866 to control the marauding Indians. Camp Logan, located six miles southeast of what is now Prairie City, was garrisoned with troops under the command of Lt. Colonel George Crook. From there a relentless campaign was instrumented. By the end of 1868 two-thirds of the hostiles had been killed; the remainder agreed to stay wherever the military designated. The discovery of gold brought the first large influx of white men to Grant County; Canyon City was to yield an eventual $26,000,000 worth. The discovery of gold was done in as awkward and roundabout way as was the naming of the John Day River.

William Allred was a member of a party going to the gold mines in Idaho. His party travelled down Canyon Creek on the eighth of June 1862 and then headed west at the present site of Canyon City. About midday they camped on Little Pine Creek not far from the site of the old town of Marysville. They agreed to rest there until the following morning. Allred decided to head back to Canyon Creek and do some prospecting. A few minutes panning yielded him about four dollars worth of gold - indication of a potentially great strike. Allred beat it back to camp to tell his partners the news, only to find they'd packed up and moved on. He caught up to them in what is now the Prairie City country and told them what he'd found. However, they'd heard too many glorious tales of the gold in Idaho to risk an unknown stake, so they headed on and Allred went with them. By the time the party arrived in the Powder River country they'd heard several discouraging reports about the Idaho mines. They decided to head back and check out Allred's find.

They arrived back at Canyon Creek July third to find a camp of several hundred men, and the creek bed down to the confluence with the John Day River taken with claims. Apparently a group of California miners had found the same prospect Allred had and decided to take the bird in hand.

Within a year it is estimated there may have been 10,000 men in Canyon City, making it the largest city in the State of Oregon at that time. Concurrent strikes were than made at Prairie Diggin's, Dixie Creek near Prairie City, Elk Creek, Susanville and others on north toward Baker. In fact, the area between Canyon City and Baker was so rich in gold that it was known as the 'Golden Crescent'.

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