External display color problem

You can try Display Maestro :

Unlock all display resolutions Display Maestro gives you full control over attached displays, allowing the usage of all available resolutions and bit depths. This is done by ignoring the operating system setting of hiding potentially unsafe resolutions.

Restore legacy depth modes It is ideal for running legacy games which require 256-color mode and do not automatically switch the screen depth for you. Mac OS X 10.5 Leopard removed the ability to set 256 color mode manually using the built-in preferences pane, but the feature is now available here in Display Maestro!

Light-weight and background-friendly Display Maestro is a small application which can be configured to launch during login, and sits quietly in the menu bar. Upon exit, it will also automatically revert your display back to the resolution chosen before it was launched.

Even though upgrading from El Capitan to Sierra didn't fix my problem, I reinstalled Sierra and now it works. I booted in recovery mode and reinstalled without an external monitor hooked up, if that matters.