Is now the time to start hoarding nickels? Coin hoarding recognizes that you never know when the metal content will exceed the face value.
Not too long ago, Canada decided to discontinue the penny. The news has resurrected the debate over the penny in the United States. Should we keep the penny? It costs more than a penny to make a penny. And, at some point, due to rising commodity prices, it is possible that it could cost more than a nickel to make a nickel.
Why is Coin Hoarding a Thing?
Rising metal prices have many wondering if it's a good time to hoard coins — before their composition changes. One trend has been to hoard older pennies that are still mostly made from copper rather than the newer pennies that are mostly made from zinc. With copper prices rising, many intrepid investors wonder if the value of older pennies could skyrocket.
“The value is so apparent the government had to institute a melt ban,” Dan Snyderman, from CC Enterprises LLC, points out in an email. “People, recognizing this, are buying copper pennies by the truckload — literally.”
However, these coins won't be truly valuable until the melt ban ends. Right now it's illegal to melt pennies down. Taking large amounts of them out of the country is also illegal. Additionally, pennies must be sorted from newer ones with little copper content. This reduces the ROI because you have to figure in the cost of sorting.
But what if there were coins that didn't require as much sorting — at least for now? For some, there are opportunities to hoard nickels.
Coin Hoarding: Why Nickels?
“Nickels — made of 75% copper and 25% nickel — are also an intriguing subject,” Snyderman says. “The metal value is slightly higher than the face value, yet no sorting is actually required at the moment.”
The relatively high copper content of current nickels might make them worth hoarding. This could be especially true if you believe there is a chance the nickel could be abolished in the future.
However, according to Snyderman, the real opportunity is that you don't have to deal with the cost of sorting: “A potential upcoming metal composition change would make the ease of unsorted investing go away.”
For now, buying nickels in bulk doesn't come with a sorting cost. Unlike pennies, you can start hoarding nickels with no problem.
“To sort nickels would require time, making the price higher to buy in bulk. For a client that wants to purchase $1 million in nickels, it requires quite a bit of sourcing, operational logistics, transportation, storage, and a variety of other aspects making it a niche market,” Snyderman continues. “Pricing does not currently include sorting, so buying in large amounts means a better/faster return on investment. If sorting becomes a necessity, pricing will have to incorporate a significant increase in time, making the return on investment much more complicated.”
How to Start with Coin Hoarding
Of course, you could hoard your coin by going down to the bank and getting nickel rolls in exchange for your paper cash. You would have to find a way to store it, just as you would with any tangible investment, like physical gold, pennies, or other coins and metals.
And you have to be aware of some of the risks involved. When it comes to coin hoarding in the hopes that the metal content will provide you with returns beyond the face value, you also need to realize that you might never realize returns as long as the coins can't be melted down.
What do you think? Is it worth it to hoard these metal coins?
This is a novel idea & alternative investment for sure. Not sure if the time spent would = $.
I’m not sure, either. But, it’s an interesting thought — especially for those who are uncertain about what the future holds, and worry about the economic situation.
Miranda,
Looking back it would have been a no brainer for a small time investor (the little guy or gale)in the 1960-70’s to have traded in there paper money for silver dimes, quarters, fifty cent piece, and dollars. I don’t know the math, but when a silver dime is worth $2.30-$2.60 at any coin shop today, it makes you wonder what a nickle will be worth in 20-30 years.
A much better move to make is to take your nickels and buy silver bullion, or better yet, silver or gold numismatic coins. 20 to 30 years down the road you will be much better off than with copper nickels.
If anything, I would hoard ‘junk silver’. Why buy nickels, take up too much space,
and the silver is a bargain right now. I bought some in ’08, and it has doubled now.
Nickels will likely never do that!!
Silver isnt actually a ‘bargain’ right now. Last time I bought silver it was less than $6 an ounce. Silver is way too volatile as far as price to think that it will never bottom out again, as far as Im concerned.
Research the declining availability of vs. the industrial demand for silver. Also, research the massive increase in investment demand for silver. Silver is a steal at these prices…. back up the truck! Take physical delivery and sleep easy at night.
…and then the economy recovers, the dollar buys more of any commodity and so silver drops back down to somewhat normal levels.
When I started buying nickels they were worth more than a nickel. When I checked 2 days ago they were worth a little less than a nickle. As long as silver, copper and nickel are consider commodities they will fluctuate in price. The better the economy, the more valuable the dollar, the less dollars it takes to buy an ounce of silver, nickle or copper assuming they dont stop mining it.
If you’re one of those Doomsday Preppers (one my new guilty tv pleasures) who believe the US government is due to fall apart any time now, there might be value in hoarding nickels for their copper. If you don’t think the government will fall apart soon, I have a hard time believing the US will rescind its law to not melt coins.
The fact is, however, that paper money has zero intrinsic value. A nickel, however small it may be, will always be worth something due to it metal content.
I’ll take $100 box of nickels over $100 paper fiat any day.
I would even consider a $50 box of nickels over $100 of US currency paper. The only advantage of the paper notes over coins is their potential use as toilet paper, but then I ‘d rather get use my nickels to buy real toilet paper. I’ve never had to use bills to, well, you know… but they seem much less efficient and comfortable than real toilet paper, or even newspaper for that matter. There are plenty of good free papers in NYC like the Village Voice, The Onion, etc… that you can even read before “recycling” them….
Okay, I accept. Send me one million paper dollars and I will send your $500,000 in nickels. If you want to do less, say $1000 in paper dollars for $500 in nickels, that’s fine. 😉
Hoarding coins is effectively buying options on metal than you possibly can’t exercise. The upside is that the option cost is simply opportunity cost of putting those nickels in a minimal risk investment such as a CD since you will always have the currency value of the coins. It wouldn’t take a ton of work to Black-Scholes compute if this is a good idea. Something else to keep in mind is that a change in laws would suddenly increase the available supply in the underlying asset as people melt down the coins. That surge in supply should depress the price of metals so your returns may not be as good as you expect.
The problem now with putting any money in a bank is the recent (Nov 16 2014) G-20 summit directives which, once put into law, will forbid bail outs (great!) but substitute them with bail-ins (not great), where your deposits will become theirs, and you’ll become a creditor for high risk investments like derivatives. Your money will now be used before anyone else’s to keep the banks in business so they can do more damage (a la Cyprus…). I forget the amount of money banks have invested in derivatives but I know it absolutely mind boggling: trillions, maybe tens of trillions of dollars invested in garbage. You’d be better off taking your money to a Casino. At least you’ll have fun losing it all. So far, the US, the UK, the EU, Australia, and New Zealand have already passed the law.
I think what you said about the coins’ face value is key, because it makes this high-risk/high potential yield investment risk-free. You got your Nickels for 5 cents a piece. Even if the price of copper and/or Nickel goes down the drain (unlikely), all you have to do is sell them back for the same price you bought them at. Historically though, metal always beats paper, and increasingly so. That’s why coins are now made of scrap metal. Maybe the next step with be plastic coins. Plus it’s immune to inflation, and capital gains taxes don’t apply to legal tender as far as I know…
If people start melting their nickels, then it gets even better because (1) their metals will lose considerable value because (2) only coins have their composition and purity guaranteed by the govt and (3) less people will have any.
I think I’d pass on the nickel hoarding. You could end up storing those coins away for decades before you saw any return. Meanwhile they’re taking up valuable space, plus you have to factor in the opportunity cost. What else could you have done with that money other than hoard nickels?
Never mind about the cost, what about the *time* spent sorting little bitty coins?
That’s so true, since time really is money!
What sorting? Go to the bank and buy a roll for $2 – no sorting.
Exactly.
I only went thru our nickles just to find out if there were any old ones.
Found a number of 1942P and 1943P WWII that are 35% silver.
Also found a few older Canadians that have the much higher nickle content.
Paper money has no real value. Its worth the same as tissue paper or a plastic bag…absolutely nothing.
At the very least the metal content of a nickel or pre 82 penny makes them worth saving.
It’s probably better to invest the money in a good blue-chip stock that pays a dividend, the reinvest the dividends in more stock.
You might reread the article, you missed the point about sorting.
I agree that hoarding metals (especially metals in legal tender form) is risky. It’s definitely an alternative investment! And thanks for the good points Brad and Mike! Any change in the laws could change the whole game!
Risky in what way? In a period of deflation they are worth no less than what you paid, during inflation they go up. It seems you would have said silver dimes (pre 1965) were risky. Seems to me they are now worth over $2(coinflation.com) They are worth this much without the need to melt them down and going against any law, which is the normal argument.
As an example: A gallon of gas in 1964(when coins were still silver was around 30 cents (3 dimes; an approximation as websites differ) Those same 3 dimes can be purchased from a dealer today for almost $8. That is 2 gallons. They hold their value.
Why does everyone think you need to melt them? No one is melting silver dimes and quarters.
they will always be worth a nickel!!!!!!!!!!!!!!1600 dollar gold could go to 400 dollar gold…not so with you’re nickels…you could never lose you’re inital investment
Not to mention the fact that the Chinese are putting out hundreds of thousands of fake silver coins, bars and rounds right now, making it nearly entirely unsafe to buy silver.
That is true, always worth the face value. They also are made of something of value and no need to melt to have value in the content. May eventually beoome like pre 1965 silver coins. I see no harm in keeping them.
I just starting ‘hoarding’ nickles and pre 82 pennies.
It actually is sound regardless…even if the nickle is taken entirely out of circulation and and the melt ban is never lifted the collector aspect will be there for as long as civilized society exists.
People dont buy old silver quarters and dimes to melt, they buy them buy the roll simply because they love to say they have them.
It wont be any different for old copper pennies and nickles.
My guess is that the nickle is going nowhere anytime in the next 30 years or more seeing that they are talking about changing the composition to stainless steel of some grade or another. If we can do steel cents then steel nickles should do just fine.
If the steel nickles are in circulation then my nickles will still be worth the nickle I paid for it, inflation and all.
But the value will be more because of the copper/nickle alloy to collectors and hoarders.
Even though people can still buy pennies and sort the pre82 they will pay a premium for a roll of presorted pennies right now on ebay.
If nothing else a $100 worth of metal nickles is ALWAYS better than digital or paper money that has no real value at all.
The value in nickels is not in melting them. It is having a form of currency that has intrinsic (not fiat) value, if/when hyperinflation hits or economic collapse happens.
The other thing to consider is a hyperinflation situation. After all, the Fed is printing phony money like water these days ($85 billion/month). In the event that the US government decides to drop a zero off of the dollar (I know, you don’t think this could ever happen), the coinage typically increases in value by the same multiple because it is much cheaper to keep the existing coins in circulation. Replacing paper currency is simple by comparison. This whole process has been historically documented many times.
Here’s an article covering this from the prepper side: http://www.survivalblog.com/nickels.html
I save nickels because if the mint decides to change the metal composition current nickels may become as valuable as silver coins have become. Also as someone pointed out they are not subject to currency devaluation.
As an aside this website article has no reference to the date it was written or posted. At least I could not locate it.
Right now on ebay there are sellers selling rolls of copper pennies (the mostly pre 82 stuff) for much more than their face value. People want them apparently. Ive sorted a few thousand myself and set them aside.
Here we are discussing buying nickles too, so in essence it has already begun.
Don’t forget Gresham’s Law! I now have close to $1,500 in nickles.
We have about $600 so far. Did the PVC tube thing like I saw on a website somewhere. Put them in and seal them up.
large banks have issued internal “look out” memorandums to their branches.
like a suspicious or large cash transactions they can deny you a large order of nickles or put your name into the ubiquitous list.
Just food for thought: in a doomsday scenario, I wouldn’t trade a can of pork and beans for a gold bar, or any money for that matter. If you have limited resources, and storage space, stock up on nonperishable foods you may actually eat at a later date as a hedge against inflation, and buy as many bullets of various types as you can afford. If you still like gold, copper, silver etc, starving hoarders will give you all you want for a meal. Bullets will be as good as money. But I can’t see what use the precious metal would be if the infrastructure collapses.
Very true, Alfred.
I have been telling gold and silver investors for years to not sit back and hope that their metals investments soar too high because that can actually be a bad sign for the economy when it takes too many dollars to buy gold.
And here we are. The economy went to pot and gold and silver went thru the roof.
Absolutely NOT worth it in my opinion.
If it all comes crashing down that gold wont be worth spit to anyone….food and water will be the new gold and silver instead.
Investing in gold and silver works IF the economy is sound.
Myself I like it when the economy is good and silver is based on supply and demand and we get those normal fluctuations in price. Its easy as can be to invest and make money because its predictable.
At this point who can tell whats going to happen now. It could be decades before the economy finally straightens out with our national debt getting so high.
True, you can’t eat gold and silver, but other than a complete disaster the USA will work to rebuild a sound financial and economic system after the crash. Gold and silver will play a part as they have always been a source of wealth. I can imagine that a new system would allow silver and gold to be turned in for a credit to use at local stores, sort of like what we have now with fiat currency but actually backed up by real wealth. But I agree, food, clean water, ammo, guns, tools, etc. will have tremendous value if the supply line gets interupted. But most likely the interuption wont be for too long. In any case, having precious metal in your hand is better than having cash in the bank under any such scenario.
alfred,
“In a doomsday scenario” you are correct and most smart folks have already made or are in the process of preparing. There are, however, numerous other potential scenarios that one can be prepared for. Gresham’s Law, for one…
Well hat is off to you Miranda for your article… the premise of collecting pennies & nickels is good… I am a coin collector for 50+ yrs… Pennies is a better investment then nickels BUT Nickels are better as there is NO sorting needed & take up to 5 times less room… Pennies on the other hand pays twice what nickels do at the present… keep this in mind… CANADA has already got rid of the penny… USA will also do the same… once they do which should be in next yr or two… then everyone will start hoarding pennies… hence value will go up – especially for collectors… just some of my thoughts & opinion… 🙂 Thanks Miranda…
I sort one cent coins for my eyesight. I look close at the date and then far as I put them in a bottle. I am writing this without glasses. I am 76 years old.
Im my country we have a lo denomination coin (COP$100 coin) made with the following composition:92% Copper, 5% Aluminium and 3% Nickel. Weight: 5.21 gram. Worth hoard it? What do you think? Note: Our Central Bank started last year a program replacing the coin with cheaper substitutes.
How many nickels and pre-82 pennies are suggested to have in order to face the unpredictable future?
No need to worry about “storing” your nickels. A mint box ($100) is not much larger than a brick, and weighs 22.5lbs.
Thiefs today are too lazy to cart away 225lbs of nickels, not to mention: “See anyone buying beer with rolls of nickels?”
Hoarding nickels is a no lose situation for any investor. The coins can be bought for their face value and will keep their face value. Silver and gold must be bought at a much higher price and with significant premiums on top of the spot price. One might never even break even on gold and silver unless their values rise significantly. Nickels area tremendous investment. Each coin is 1/4 nickel and 3/4 copper; both somewhat valuable metals. As you may recall, nickel coins being made during WWII had their nickel content removed and silver was substituted instead because nickel was the metal in more demand for the war effort. Imagine that, substituting silver for nickel in a nickel coin. Today, the silver war nickels are worth much more than average nickels but it goes to show you that nickel has it’s place among the metals. Hoarding nickels is not for the weak. They’re heavy metal and it doesn’t take much to have a pile of nickel rolls equal in weight to a boat anchor. Still, if you have a good safe place to stash a bunch of them then it may be a good idea if the value of each nickel stored goes to twenty or thirty cents each. Just buy $20 worth, ten rolls every week, you wont even miss it.
I am amazed that nobody knows/remembers in 2006, the London Metals Exchange (LME) defaulted on the nickel futures contracts. It sent nickel prices soaring to over $10/pound. Gold and Silver sellers/publishers want you to buy gold/silver and not palladium, cobalt, lithium. or any metal they can’t make a profit on.
Ever since the nickel default, i started buying a box of $100 nickels about once every other month. I usually get the new circulated nickels. THEN I HIT THE JACKPOT in 2009 and did not even know it til later.
The US Mint hardly made any 2009 nickels that year because of economic downturn. I was able to sell some of the 2009 circulated rolls for $80/roll. I was lucky enough to buy $800 worth of nickels that year.
So i have a few closets full of boxes of nickels and when i moved a few years ago to a larger house.. i cant even begin to tell you how hard it was. Took me weeks and I did it all myself. if anyone ever tried to steal my nickels would take them forever.
I even had so many nickels upstairs I thought the 2nd Floor might cave in.
But these are the facts:
1. I can always take them back to the bank. Risk Free Investment.
2. Nickels have 25 percent nickel 75 percent copper. Both are used in electric cars.
3. The US Mint is currently look at using another metal to substitute for nickels and might have to use zinc which is also running short in supply. The Mint wants to keep the weight at 5 grams.
4. The warehouse stock levels for Nickel on the LME is at a 3 year low and dropping fast.
5. There is no possible way the central banks will be able to control inflation in the future. The cannot and will not be able to raise interest rates on the huge amount of debt they have created.
It would be cool to buy $50 in nickels, burry it and leave a map to descendants. The metals will be worth more in 25 years. Its a fun way to preserve a legacy.