Investing In Copper Pennies

Maybe you have seen something about it on one of the prime time news shows, maybe you heard something about it on the radio, or even read about it on the inter-net. Even so, you are still asking yourself why are these people buying pennies? Are They crazy?

Yes, people are paying more than one cent for circulating pennies, and no they are not crazy. They are very wise investors indeed.

Before I explain why, lets's start with what I am referring to when I say pennies. Pennies are US Lincoln memorial cents. They started production in 1908 and are still being produced as of the 2012 production year.

When I refer to copper pennies, I am referring to those produced from 1909 to about the middle of 1982. During those years pennies had a metal content of 95% copper and 5% zinc. This composition actually dates back to 1864 (before Lincoln was on the cent), but you would not want to save these for their copper value as their numismatic value is much higher.

During the middle of the 1982 production year, the metal content was switched to 95% zinc and 5% copper. It's actually a zinc coin with a copper cladding. The coins produced from 1909 to 1958 are known as a wheat back. Depending on the condition, date, and mint mark, these pennies are highly sought after and worth far more than their value in copper. This alone is a great reason to pay a premium for already sorted copper pennies. It is also noteworthy of mentioning that due to war time shortages the 1943 penny was produced from steel. Although these have no copper value, many people collect them. They are easy to recognize because of their gray or steel color.

PENNIES AS BULLION?

So the idea behind buying copper pennies is assimilated to buying bullion, like copper ingot bars. Much the way you might buy gold coins instead of gold bars. The difference being the price per oz. of a gold coin is usually not much different than the price per oz. of a gold bar. Minted coins are more easily recognizable, therefore sometimes easier to liquidate.

The biggest difference with copper is the spot price. The spot price is the going rate for a commodity on that particular day. Copper ingot bars usually sell for about two to three times the spot price. This is due somewhat to the cost of smelting and refining. That means you could pay up to three times what it is actually worth. You are going to have to wait that much longer before you can recoup a worthwhile profit on your investment, and if you should need emergency access to your money in the mid or short term, you will have to take it at a loss.

Right now you can buy pre-sorted, unsearched copper pennies well below spot price, and with it being coins they will always be worth at least one cent, regardless of the copper market. Take the time to pick out the wheat backs and other desirable years and you could probably pay for your investment.

CAN PENNIES BE MELTED?

As of 2007 it is against Federal Regulations to melt or destroy US cents or nickels(nickels are worth 7 1/2 cents). Many assume, and probably correctly so that pennies will be phased out of the currency system soon, at which point it would be completely legal to melt them as the ones in your possession would be your property and not the Treasury Department's. In the meantime, there is a large secondary market for the buying and selling of these pennies.

DO I HAVE TO BUY COPPER PENNIES?

You do not have to buy copper pennies to acquire them, although this is the best way to get enough of them at a time to make it worthwhile to invest. These pennies are currently in circulation and you can get them right from the bank. There's a catch though......You will have to sort them from the post 1982 pennies they are mixed in with. You will get an average of about 20% copper pennies in any rolls you get from the bank. Then you will need to spend most of your free time sorting through the dates, separating copper from zinc. After that you will need to decide what you are going to do with the 80% of the pennies you don't want. Perhaps you could take them to the coin-star machine and pay a percentage in processing fees(make sure you deduct that from the value of your copper). All this seems hardly seems worthwhile, it's not gold, it's copper. Buying the pennies pre sorted at a premium but still well below what you would pay for copper bullion anywhere else seems the way to go unless you just have a lot of free time on your hands.