Copper pennies: The safest bet in years… But what has everybody been missing?
For close to a decade now, the copper penny craze has been getting more and more exposure. ( The news that 1 penny is worth over 2 pennies seems to spread fast.) Even in 1982, when the penny was first switched over to zinc construction, investors were hedging their bets by buying dozens of boxes of copper cent pieces. 30 years and over 100% gains later, the rest of the world is catching on.
While the value of the US dollar drops, so too drops the value of the copper penny; at the same time, the value of copper and zinc is going up, up, up! This has lead to the metal value of pre-82 pennies – weighing in at 3.11 grams per copper penny (or 146 copper pennies per pound) – to be worth 2.2¢ each as of today.
But, when talking to a copper penny “hoarder,” I often realize: They have no idea how the second-hand commodities market works! In fact, some copper penny hoarders are so far detached from the scrap copper market that they think copper pennies should have a premium over scrap value!
Just to be clear, I think collecting and saving copper pennies is a phenomenal investment, especially in a SHTF scenario. But you should never BUY copper pennies at a premium, and here is why:
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Copper Pennies Are NOT 100% Copper!
In fact, copper pennies made during or before ’62 are 5% tin and zinc, and Copper pennies made after ’62 are 5% zinc! This was done to make the pennies a little more corrosion resistant, and a lot stronger. It wasn’t until 1982 that pennies started getting minted with 97.5% zinc. (Surprisingly, there are many people in the US that don’t know that the modern day penny is zinc. )
- Copper Pennies Are NOT Worth Copper Spot Price!
Every time I discuss hoarding with a penny hoarder, they continuously push copper spot price in my face. What many don’t understand (not all, but many) is that copper pennies are worth nowhere near spot price! Copper spot price is what it costs to buy electrolytically refined pure copper, 25 tonnes at a time! There is not a single refinery in the world that will buy copper pennies for copper spot price. Not one. Buying/selling copper pennies at spot price (or even close to it) is like buying 18k gold at gold spot price. It’s absolutely ridiculous. -
Copper Pennies Are NOT Worth Copper Scrap Price!
Even if the copper penny ban were lifted immediately, copper pennies wouldn’t be worth their weight in #1 copper scrap. Why? Well for starters:
• Copper Pennies are 5% zinc! Small amounts of contamination – especially an amount like 5% – calls for a relatively large percentage downgrade for any type of copper scrap. It makes refining the metal more expensive, and that extra cost is going to come out of the seller’s pocket, not the buyer’s!
• Copper Pennies are relatively thin! Scrap copper pennies are a hair under 1/16″ in thickness, which anybody who has sold light copper to a scrap yard knows is not worth as much as thicker walled copper!
• Copper Pennies are hard to buy! If a scrap yard is buying 500 pounds of copper pipes from a plumber, they can simply load them onto a scale and pay you. But if any Joe bring in 500 pounds of copper pennies, the pennies need to first be sifted through for foreign objects (small pieces of steel, balls of lead, etc) to assure that nobody is trying to cheat the scale. This is not too big of a deal… But then the yard would need to check if all the pennies are pre-82! The cheapest, most cost effective method for checking a bag of “supposedly copper” pennies, is to compare its volume to it’s weight. Unfortunately, this is not going to simply be the density of copper because a pile of copper pennies is full of air! Even stacks of rolled copper pennies will still have air (and paper contamination). Both of these hiccups in the buying process are going to make buying copper pennies more of a chore then a treat!
What that means is, unless you are selling more the a few tons of copper pennies, expect to get ~70% of spot price. If you are selling more then that, then something closer to 85%-90% of spot price is in order. (Still worth saving, by any means!)
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Copper Pennies Could Get Hoarded By The US Mint (possibly)
As I’ve already mentioned, the US mint is currently hiring consultants to find a new one cent piece alloy and 5 cent piece alloy. That means, they know how much their coins are worth. (Heck, they have for a few decades)
Some coin hoarders are aware that in Canada their mint has been pulling and melting all high value metal coinage for about 6 years. This is part of what was dubbed the Alloy Recovery Program or ARP, and it has made their mint profit!
What is stopping the US Mint from doing the same thing? They apparently had the unwritten power to ban the melting of pennies and nickels in December 2006. What is to stop them from starting their own ARP? What is stopping congress from passing some type of ARP tomorrow?
There is an estimated 140 billion total US pennies in circulation. Of that, even if 10% are copper, very conservatively, we’re talking about 14 billion copper pennies, which “theoretically” (again, I hate to use spot prices) is $380 million as of today! If you wanted to be more liberal with your estimates, you may find there is over $1.5 billion worth of copper pennies in circulation. (This is not even counting 5-cent pieces!)
Again, I’m not saying it will happen… but it could happen.
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Investing in Copper Pennies is NOT a “Risk-less” Investment
The US is experiencing stagflation right now, and its dollar is losing value! The US unemployment rate has only dropped 1% since its peak at 10% in late 2009. Inflation is still over 3.5%. An investment in copper pennies, if the melt ban isn’t lifted, is going to be a net loss. A relatively small loss, but a loss none-the-less. (Many agree, however, that potential gains are worth paying a small percentage to inflation if things don’t work out ) -
Buying Copper Pennies is NOT Equivalent to Buying Regular Copper Bullion
Before you considering buying copper pennies, ask yourself: “Do I want to just buy un-regulated copper bullion?”
Unfortunately, copper pennies are just that – government regulated copper bullion. The government is determining it’s value by imposing a melt ban. Do you really want the US government deciding the value of your copper bullion?
In a penny hoarders’ fantasy, smelters will buy up copper pennies by the ton at spot price. Everybody in the metal industry – everybody – agrees that is not going to happen when the melt ban is lifted. (if the melt ban is lifted). Will they get bought up? YES! Will it be at the same price as any other type of copper scrap? YES! And for the last time, don’t get sucked into the silly idea that copper pennies are “worth their weight in spot-copper.”
Many investors (the ones who are well versed in buying and selling gold and silver bullion anyway) are calling copper pennies “copper bullion.” While, technically, pennies may fall under a very general definition of “bullion,” that same definition also makes copper pipes “copper bullion” as well. In fact, copper pipes are more fitting to get called “copper bullion” as they are not made of 5% zinc,and there isn’t a melt ban on them.
The advantages of calling the copper pennies “bullion” is obvious: metal bullion is worth a premium in the eyes of an investor. (Unfortunately, copper water pipes, which can be picked up at any hardware store, are just as pure as any type of “copper bullion” on the market.)
If you are sorting copper pennies, more power too you! I am as well! But, I have seen some people buy them for more then scrap price. Don’t be that person. Firstly, you shouldn’t be buying copper pennies from anyplace but the bank. Secondly, when you realize that you could have just bought scrap copper , you will feel like a fool.
- This is Not the First Melt Ban On Copper Pennies!
Imagine, for a moment, that it is 1974. Nixon is still in office (3.5 months before the water gate scandal), and copper spot just hit $1.20 per pound! “How can that be?” everybody thought, “Soon that means it will cost more money to make a penny then it is worth!” The Treasury Head quickly released a ban on melting pennies, afraid that if prices rose above $1.50 per pound people would start melting them for quick profits.In the few years that followed, copper pennies were scrutinized by congress, and and plans for aluminum pennies were drafted up! (One rare example still exists!) Unfortunately, interest in making an aluminum penny was shot down by vending machine lobbyist.This small article from 1974 summarizes the feeling at the time. The article clearly states, “The problem is further complicated by ‘hoarders’ and speculators buying up pennies on the assumption it will soon pay to melt them down and sell the copper” 40 years later, and it looks like they were spot on!
If you are collecting copper pennies, or just want to share your input, please comment on this post or add your voice to our scrap metal forum!
{ 25 comments… read them below or add one }
How many copper pennies to a foot of copper pipe?
It depends on the type of copper pipe, but I can tell you that it takes 146 copper pennies to make 1 pound of copper.
You don’t know what you’re talking about. Copper Pennies are a great investment! They are basically free money, and your scrap yard drug addicts can’t change that!
And you dont know how to read the article. The title is “7 reasons to not buy copper pennies” – say again BUY. The last two sentences before reason 1. are:
“Just to be clear, I think collecting and saving copper pennies is a phenomenal investment, especially in a SHTF scenario. But you should never BUY copper pennies at a premium, and here is why:”
This is sound advice – collect, sort, save all you want just dont pay to do so. Also, insulting everyone on this website by calling them “scrap yard drug addicts” shows you are an ass.
It should also be noted that it is completely, 100% illegal to scrap US currency. Any one selling copper pennies should understand the penalties if you are going to try and save your pennies for scrap.
A good number of the 82′s are copper so check all 82′s!!!
True, I put one on my scale and it came up as 3.1 grams. Pre-1982 pennies will also make a different sound when dropped on the ground compared to Post-1982 penny.
I collect pennies, but not for their scrap value, I just like old pennies. I’m currently collecting pennies from 1900 through 1982. I work at Walgreens, graveyard shift, so I usually have time to go through the pennies and look for ones of “value” (to me). The oldest I’ve found is 1917, in beautiful condition for a 95 year old coin. When I find one I want, I ask my manager for permission to trade out a penny from my wallet for the penny I want. They don’t care because to them, a penny is 1 cent, regardless of its year, but it’s good for me. I particularly liked a 1962 penny I found, and I was going to give it to my dad on his 50th birthday this year (he was born in ’62). I was going to encase it in casting resin and mount it in a frame with a map of the city he was born in and some facts about the year and his life. It never ended up happening because my brother, who was supposed to be helping me with it, never actually did help. It goes to show the value of something, regardless of its stated value. A penny might have a value of 1 cent as far as the mint is concerned, but it can have a lot more intrinsic/sentimental/whatever value apart from that.
Appreciate the information. Very Educational & Interesting.
Yes, I enjoy collecting pennies in addition to scrapping:)
Christmas Blessings to all.
Judy
Calculate the time value of buying pre sorted copper pennies over hand sorting them. Then you can do an article titled always buy copper pennies, never hand sort them.
If your heart is set on owning copper pennies, I suggest you buy/make a machine sorter and make the process automated, never hand sorting.
If you have say a hundred pounds of mixed pennies, is it best to just deposit them, or sell for scrap. There are no wheat pennies in the amount of lbs.
While copper is a base metal and not a precoius metal, the same seven reasons could be applied to silver coins. Yet people pay over scrap or metal value for them. I dont see the differance.
Copper’s value drops in a depression, or a SHTF scenario, where as silver’s value remains strong or even increases. Also, the premium being paid for .999 silver is very small relative to its overall value; for copper, the premium is almost 200% of spot value. Finally, it only takes a briefcase of silver to buy a dump truck full of copper, so the convenience and discretness is what makes silver a much more reasonable investment… You may or may not realize, but there is nothing special about “investment grade” copper, it’s everywhere. The copper pipes in your house are all .999 pure copper, and so is all the electrical wiring.
You can actually get the copper pennies for 40% UNDER spot at the moment. I do however agree Silver is easier to store and carry. Silver can also go down in an economic crash though as history has shown. The long term is good for anything measured in dollars though.
All good points; the biggest point of caution for copper pennies is that lesser informed people think that copper pennies are worth spot price, but they most certainly are not.
Coppers value would drop in a defaltionary depression but not a hyperinfaltionary depression. Silver is also a industrial metal and the price would drop in a delationary depression. While copper rounds premiums are almost 200% prices paid for copper pennies are considerbly less. I can remenber people making the same dump truck argument ten years ago when when comparing silver to gold.
Yes, but copper pennies are not made of pure copper. They would need to get refined to be worth anything close to spot value, (pipes, wire, etc), which most investor’s don’t understand.
You’d be better off buying scrap grade copper that has a known value, like Bright Copper; which is 99% copper (but is still worth less than spot price because it isn’t pure electrolytically refined copper, which is the definition of “Spot copper”)
Yes I agree with your statement, but silver coins a re not 99.9% silver and still need refined also. Are you willing to make the the same starement thats its better to buy 99.99 silver rounds than 90% silver coins. Both silver and copper coins have a known value and are already bought and sold at coin shops and on ebay. as long as you nare not paying a hugh aoumt over the value of the coin I think the are both good stores of value. (Sikver having a better upside for supply and demannd reasons.)
Gresham’s law still applies even in light of your, valid and insightful points. Fact is, the value does exceed the fiat value. You shouldn’t dedicate your life to scraping the system of copper pennies, but when you come across them, you should put them aside and let them accumulate.
That is very well said! What are your thoughts on buying copper billion? For example .999 bars? What about buying scrap copper wire or scrap copper pipes for less than spot price?
Well, I can only say that there is one consideration that has bean completely overlooked…Numismatic value. Albeit rare, there are pennies worth over $100,000. The more you collect, the better your chances of aquisition. Sure, it takes time, but some have much more time than others. Consider this in the equation. Thanks and God bless.
Great point! While I’ve always pulled the wheaties and such, I don’t think most of the collectors do. Although nothing says they can’t go back and sort them later… unless they melt them.
That being said, in a SHTF scenario, nuministic value means nothing. Although I’ve never cared to think much about SHTF scenarios.
Which is better? Saving paper & electronic money at a bank which gives 0.01% interest in 2% yearly inflation for 10 years or buying silver at $25 per ounce and storing it for 10 years? Or buying copper at spot price +60-1,000% premiums and waiting 10 years?
I wouldn’t trust Fiat currency for saving money, and neither will I pay above spot for copper rounds. Copper is everywhere!
I hand sort pennies myself and hoard up the copper as well…. But I am not really doing it for the copper value… rather I do it for the value of rare pennies such as double dies etc… Keeping the pre 82 pennies is just a bonus as far as I am concerned. But the value of the errors and such far far far outweighs ANY copper hoarding… I generally pull in an extra 20,000-35,000 dollars A year finding rare coins and varieties in circulation and selling them online or locally. I do search 5000-7500 pennies daily and it takes about 3-4 hours a day to do it. If they ever lifted the melt ban then I would certainly cash in the vast amount of copper pennies I have. But this article is right…. DO NOT BUY COPPER PENNIES…. Unless its from me lol