OED says "gay cat" is early 20th-century U.S. slang for a young or inexperienced tramp, a hobo who accepts occasional work--"cat" meaning "guy," "fellow," etc. Over time, "gay" had various negative connotations (in addition to many positive ones): forward or impertinent, overfamiliar, dissolute, loose or immoral (it was once applied to female prostitutes, for example). As melliloquence points out, it was also slang for a homosexual boy in the early 20th century: that definition was cited in a 1935 book, Underworld & Prison Slang.
Early 1900's slang for a male homosexual. Before that it was used to refer to a young tramp, who would often be "adopted" by an older tramp, who would show him the ropes for street living. This is where the word 'gay' is derived from.