Buy real nickels while you still can

Copyright 2014 John T. Reed

If you were alive in 1933 and old enough to carry change in your pocket, you regret not buying as many $20 gold pieces as you could. They cost $20. By May1st of that year, they all had to be old to the federal government for $20.67 per ounce, the same price they had been since 1832.

If you were alive in 1964 and old enough to carry change in your pocket, you regret not buying as many dimes, quarters, and half-dollars as you could. They were made of silver and only cost 10¢, 25¢, and 50¢.

In 1965 the U.S. mint stopped making them and their value went up. Today, 1/17/14, the melt value of those coins is $1.47, $3.67, and $7.34 (www.coinflation.com).

Actually, the issue is not what they became worth years later, but what they were worth the day you bought them.

Today, you can buy circulating pennies and nickels for 1¢ and 5¢. What is their melt value today? A pre-1983 penny is worth 2.21¢. Post-1982 pennies are worth .55¢. And nickels are worth 4.6¢.

But you should buy them. Today’s Wall Street Journal has an article saying the U.S. Mint is trying to come up with a new nickel that is made out of the same stuff as current pennies, namely most zinc plus some copper. They are the same color as current pennies but the same size and engraving as current nickels.

Why buy, say, $1,000 worth of nickels if they can only be sold for $920 when melted? Because they can always be sold for the amount engraved on them, which is 5¢ each or $1,000 for 20,000 of them. And if the USD price of nickel and/or copper goes up, which it will because of inflation, the melt value of the nickel will rise accordingly. In other words, the current nickel is a “heads I win, tails you lose” deal. Or more precisely, inflation, I am protected by the melt value; deflation, I lose nothing because of the engraved value.

Pre-1983 pennies are an even better deal. If you buy $1,000 worth of them at face value, you just made a melt value profit of $1,100. The problem is no one is going to sort through, say, $20,000 of currently circulating pennies to find the $1,000 worth of pre-1983 ones without charging you for the labor.

Any day now, the U.S. Mint will announce that they will be ending the production of pennies and nickels. Canada ended production of pennies a couple of years ago. So today is like 1933 for gold coins and 1965 for silver ones.