The island experienced a brief gold rush in the 1860s, but very little gold was actually found. In 1864, the United States federal government, fearing attempts to outfit privateers by Confederate sympathizers in the American Civil War, ended the mining by ordering everyone off the island. A small garrison of Union troops was stationed at the Isthmus on the island's west end for about nine months. Their barracks stand as the oldest structure on the island, and are currently the home of the Isthmus Yacht Club.
By the end of the 19th century, the island was almost uninhabited except for a few cattle herders. At that time, its location just 20 miles (30 km) from Los Angeles—a city that had reached the population of 50,000 in 1890 and was undergoing a period of enormous growth—was a major factor that contributed to the development of the island into a vacation destination.
The first owner to try to develop Avalon into a resort destination was George Shatto, a real estate speculator from Grand Rapids, Michigan. Shatto purchased the island for $200,000 from the Lick estate at the height of the real estate boom in Southern California in 1887. Shatto created the settlement that would become Avalon, and can be credited with building the town's first hotel, the original Hotel Metropole, and pier. His sister-in-law Etta Whitney came up with the name Avalon, which was taken from Alfred, Lord Tennyson's poem "Idylls of the King," about the legend of King Arthur. Despite Shatto's efforts, he defaulted on his loan after only a few years and the island
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