Stocks and bonds are the normative routes people take to invest their money, sometimes also investing in metals that are traded everyday, such as silver and gold. However, a new class of metals investor is on the rise: the coin hoarder.
Why the sudden obsession with coins in America? American coins are composed of various base metals. Before 1965, the US Mint forged dimes and quarters from silver; but, silver costs soon skyrocketed, compelling the US Mint to employ a cheaper metal. Before 1982, pennies were mostly made from copper, until zinc became the replacement metal. Nickels are the hoarder’s favorite: they have always been composed of 25% nickel and 75% copper. In addition to nickels, pennies are the hoarder’s other preferred coin — both are still largely composed of copper.
Yet, there’s a catch. In 2006, the US government placed a ban on melting pennies and nickels. This has stopped hoarders from reaping the benefits from their investments; the value of their hoarded stash remaining hypothetical, at best.
Those who have taken a liking to coins come in two breeds: investor and hoarder. But make no mistake — there is most certainly a discernible difference between the two. While the hoarder is patiently waiting for the government to revoke the melt ban as to cash in on the value of the base metals, and continuing to amass as many coins as possible; the investor is collecting coins that are scarce and rich in history.
Though metal prices fluctuate daily, and sorting can be a time-consuming task for hoarders, there is no gamble in this investment. American coinage has yet to see an impact from coin hoarding, unlike other countries, such as Argentina and the Philippines, which are both experiencing coin shortages. If the US ever faced a similar shortage, then the US Mint could easily forge more coins, though it might be hesitant since it is an expensive process.
Unless individual metals can be economically and environmentally extracted from the coins, the best economic value is still the coins. No technologies exist right now to separate individual metals (such as copper from zinc in pennies, and copper from nickel in nickels) in coins. If the US Mint has to produce more coins due to a coin shortage, it could add costs to US Treasury’s budget; and we all know too well that we need to cut spending and not go over the fiscal cliff. Coins should be collected as a hobby and not hoarded as an investment.
Developed and Written by Dr. Subodh Das and Tara Mahadevan
January 3, 2013
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