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As the US dollar continues to be devauled the metal content value of US coins will eventually be worth more than the face value of the coins.

There use to be silver in US coins but due to the continued debasement of the dollar, the silver content of the coins became more valuable then the face value of the coin. People could melt the coins into silver, sell the silver and be better off.

There use to be copper in US pennies but the copper value of the coin increased over the face value of the coin. Now a penny is mostly zinc.

This is an effect of Gresham's Law: "Bad money drives out good money."

Right now the metal content of nickels is worth more than their face value (Here is a neat website detailing the metal value of coins). I expect the mint to change the metal content of nickels to mainly be zinc instead of copper. This will make pre-2010 nickels dissappear from the market since people would rather hoard copper nickels and spend the less valuable (in terms of metal) zinc nickel.

Do you think it is worth the hassle to stockpile nickels?

NOTE: I'm not suggesting that I melt the coins. I'm just suggesting that I hold onto the nickels and sell them later when they are worth more than 5 cents. For example, you can sell coins with silver in them for far above their face value.

10

At one point it was illegal to melt silver coins in the US, but it is legal now. I don't know that will happen with copper coins, but that's what happened with silver coins.

Accumulating nickels and leaving them as-is (in their spendable state) is legal. It's also a way to take physical ownership of copper.

I expect to see more sales of nickels based on weight. People are already selling high-copper-content cents on eBay, by weight. There are machines in production that sort the zinc ones from the copper ones. Gresham's Law has small business backing. ;)

Copper cents are already worth twice their face value in the copper content. Nickels will get up there, too.

They are awfully heavy and bulky relative to their value, though. Precious metals give you better bang for your ounce.

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    Melting copper coins is illegal. usmint.gov/pressroom/… – Muro Aug 21 '10 at 12:50
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    I know that. I was saying it was now legal to melt silver coins. – mbhunter Aug 21 '10 at 19:48
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Probably a big fat NO.

  1. I do believe it is illegal to harvest money for their raw materials.
  2. You have to store them somewhere and they're not exactly light.
  3. This is right up there with your stock piling Jack Daniel's idea. :)

Update re this edit:

NOTE: I'm not suggesting that I melt the coins. I'm just suggesting that I hold onto the nickels and sell them later when they are worth more than 5 cents. For example, you can sell coins with silver in them for far above their face value.

This is silly as an investment. Right up there with stockpiling cars. :)

The increase in value will likely never be enough to make the cost/hassle of storage worth it. As MrChrister states, it is a fine idea as a collection, but not as a stockpile.

Edit (from the comments):

I am surprised I did not latch onto this in the previous update. Silver is considered a previous metal, nickel and copper are not. BTW, the U.S. nickel is 25% nickel and 75% copper.

Also, how in the world do you plan on actually selling a stockpile of nickels?

  • I added a note to my original question indicating that I don't plan on melting the coins. Storage is a problem which is the only thing that makes me second guess doing this. I'll stick with stockpiling Jack Daniel's. :) – Muro Aug 20 '10 at 17:25
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    @muro That's a slightly different idea. That said, it is still a silly idea as an investment. – George Marian Aug 20 '10 at 17:37
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    @Muro - nobody would steal it, but if they knocked it over you would spend forever stacking them back up =) – MrChrister Aug 20 '10 at 18:31
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    @muro Is it just me, or does it seem like your mind is made up and I should not bother you with the facts? Do your calculations for gold/copper include storage/security costs? That is one of the big things that people do not realize about investing in precious metals: you have to pay to store and secure them. Regarding your idea, have you thought about how you would actually sell 20,000 nickels? For example, you can sell coins with silver in them for far above their face value. That's because silver is a precious metal, nickel is not. – George Marian Aug 20 '10 at 18:38
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    @muro With facilities that you do not have in place and that make sense for precious metals. – George Marian Aug 20 '10 at 19:09
5

Stockpile? No.

Keep a few around? Sure, if you are a collector. I used to collect pennies and I thought the steel pennies from WWII were neat. I do believe I paid about $0.01 for them at the coin shop. They might be worth $0.15 if in great condition today.

No harm in finding $20 worth of really nice nickels, maybe in chronological order and from the different mints. Put them in a collector case so they stay nice and chuck them in your fireproof safe with your house deed and insurance policies.

But I don't think you are going to hit it particularly big, but it might be a nice thing to pass along as an inheritance.

  • Yes certainly pass it along as Inheritance. The value of coins as collectibles keeps increasing. Certain coins of 1900 go for more than $100 – Dheer Aug 20 '10 at 17:40
4

It seems like a lot of hassle to make a few bucks. $1,000 in nickels would weight 100kg. I'd rather put my money in ING or into a bond mutual fund like VBMFX.

2

The question I think is not: "What is a certain material worth in a coin" but "What is a certain material worth in a coin and how much does it cost to get it out of there".

Just because something contains a certain element doesn't mean that you can get to it cheaply.

Also as George Marian said: I don't think that it is legal to melt coins. So if the time comes you would first have to find a company willing to process the coins etc.

Also you should not only compare what it is worth now and at a later time but also what that money would be worth if you put it into a high yielding savings account or something like that.

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    Oh and by the way. I just looked at the prices of zinc. A metric ton of zinc gets you about 2000$. So for every 2000$ to invest you would have to: 1.) Obtain 1mt in nickels (which won't be that easy I assume) 2.) Find a place to store 1mt of nickels :) – Plankalkül Aug 20 '10 at 17:08
2

Trying to engage in arbitrage with the metal in nickels (which was actually worth more than a nickel already, last I checked) is cute but illegal, and would be more effective at an industrial scale anyway (I don't think you could make it cost-effective at an individual level).

There are more effective inflation hedges than nickels and booze. Some of them even earn you interest. You could at least consider a more traditional commodities play - it's certainly a popular strategy these days. A lot of people shoot for gold, as it's a traditional hedge in a crisis, but there are concerns that particular market is overheated, so you might consider alternatives to that.

Normal equities (i.e. the stock market) usually work out okay in an inflationary environment, and can earn you a return as they're doing so.... and it's not like commodities aren't volatile and subject to the whims of the world economy too. TIPs (inflation-indexed Treasury bonds) are another option with less risk, but also a weaker return (and still have interest rate risks involved, since those aren't directly tied to inflation either).

  • Agreed. I have purchased some commodity ETFs and some dividend yielding stock. I also believe, however, that I need some "funds" outside of the banking system. – Muro Aug 20 '10 at 18:35
  • @muro Your best bet for "funds" outside of the banking system is probably precious metals. Assuming a not-so-doom scenario, cold hard cash. Assuming a crap hits the fan scenario, guns & ammo. (Money may very well be worthless.) Note though, that a stockpile of either can be a security concern both for you holding on to them and for you not getting killed/hurt over them. Add to that the maintenance issues for guns & ammo. You can't just throw them in the basement and hope they'll work fine in a few years time. – George Marian Aug 20 '10 at 18:50
  • @fennec: Are you saying it's illegal for me to find someone who wants to buy $1,000 face value of common nickels for $1,100 if the copper in them is worth $1,200? I'm not melting them, and I can't control what he/she does with them. – mbhunter Aug 21 '10 at 5:03
  • Maybe not, but your buyers may be thin. – fennec Aug 21 '10 at 5:09
  • There were only eight people on the Ark, too. ;) – mbhunter Aug 21 '10 at 5:14
2

The collectible value of coins will probably increase with the underlying metal value. I'd collect coins for that reason and because I enjoy collecting them.

I wouldn't recommend buying bags of rolled nickels or anything though.

0

I agree with George. I'll also add that you have to think about the cost of melting the coins for their raw materials. Not exactly free in terms of equipment, facilities and energy costs.

-2

You would have to collect an awful lot to make it profitable. The melting process alone will cost an arm and a leg.

Go silver hunting with rolls of Half dollars. You might strike it lucky with rolls of Kennedy's. Its good fun too :)

1964 Kennedy's 90% silver

1965-1970 Kennedy's 40% silver

I go looking on ebay collecting for typo errors on pre 1920's British silver coinage. Picked up a George 3rd 1816 Shilling for £3....worth £30....but even if your doing it just for the silver content, you can pick up a real bargain. Just think of how your going to offload them.

Here in the UK its easy because there is a huge market for Numismatic coins.

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