Canada has decided to do away with the cent, citing that it costs the mint 1.6 cents to produce one. Transactions will still be tracked to the cent, but if both parties find themselves without cents in a cash transaction, the transaction will be rounded to the nearer nickel.
The reason this has come to pass, of course, is because of inflation. A cent just isn’t worth what it used to be worth, so it purchases less — including less of the metal that’s used to make it.
I can’t see the US Mint being too far behind. Our cents are expensive to make, too.
The Mint has already changed the composition of the cent once: 1982. It used to be 95% copper. Now it’s copper-coated zinc with only 2.5% of the weight being copper.
The cost of the metal composing the newer “Zincoln” cents is about half its face value today. The older copper cents, however, contain almost 2.5 cents worth of copper.
That’s 2.5 cents of copper for a cent, or 40% of spot price. (Current metal content value is here.)
A Lincoln cent is a Lincoln cent … to most people
If you have a jar of coins and were to take them to the bank, the teller would just load them up into a coin-counting machine to count them. These machines don’t differentiate between the copper cents and the zinc cents. They’re all the same to that machine.
But sort out the copper dates by hand, or with a Ryedale penny sorter, and now you have a product that people will pay a premium to face value for. $100 worth of sorted copper cents goes for $160 or more, plus shipping, on eBay. It goes at a discount to the actual price of the copper content because it’s currently illegal to melt the cents down to recover the copper. But, once copper cents become truly rare in circulation — mainly because the price of copper increases so much that spending these cents at the grocery store would be dumb — then the need for the melting ban will go away, the way it did for gold and silver coins.
So buying these cents now is done with the hopes that the cents will hold their value against inflation. They’re bought for the copper, which at some point in the future will likely be able to be extracted legally, and sold at much more than a $0.01 per melted cent.
Physical metal can be part of an investment portfolio just as well as stocks, bonds, or anything else. The time for pulling out gold and silver coins from circulation has largely passed, but not for copper cents. There are still enough in circulation that you can find a few in your change, though they are disappearing.
There are lots of ways to take investment positions in metals, but the main advantage of owning the physical metal rather than a futures contract or an ETF is that you know exactly where the metal is: in your possession, somewhere you can access it and touch it. (This is also the main disadvantage, of course!)
To increase volume of collected cents, you can go to the bank to request a box of mixed cents, and then sort through them one way or another. This takes time, but you’re paying face value for all of the cents, including the copper ones.
The most cost- and time-effective way to get the copper cents in bulk, though, in my opinion is simply to buy them from someone who has already done the sorting. $100 face value in copper cents weighs about 68 pounds shipped, and takes up the space of a medium-sized flat-rate USPS box.
So, for the budget-conscious metals investor who has some space to spare, copper cents can allow you to get a position in physical copper at a discount. Whether this describes you or not is up to you. 🙂