Nickel Bullion
On other pages, I have discussed investing in precious metals such as gold, silver, or platinum. On this page we discuss investing in copper and nickel bullion, specifically by investing in large quantities of United States nickels.
Investing in nickels? Surely you are joking Dr. Planchet
Kyle Bass, a hedge fund manager, has acquired one million dollars in nickels. Perhaps he knows something.The United States nickel is composed of 75% copper and 25% nickel. The metal value of the coin is now more than five cents. (The current value based on today’s copper and nickel prices can be found at coinflation.com). This provides a practically risk free method of investing in copper/nickel. If the price of copper and nickel rise, you should eventually be able to sell your nickels for a profit. If the price of copper and nickel go down, however, you do not lose, since your nickel will still be worth five cents. This is an attractive investment profile. For comparison, the $50 face value of a one-ounce American eagle gold coin is negligible compared to the current value of the gold. You would risk most of your investment if gold plummets.
The government would prefer you not hoard the nickels
The US government produces nickels as circulating coins for commerce. They currently lose money on every nickel they produce. The government has passed a law prohibiting the melting or export of cents and nickels. In my esteemed opinion, this will be ineffective against hoarding. Pre 1965 silver coins are regularly traded for their silver value without melting them. If the nickel is a commodity worth more than five cents, citizens would be foolish to spend them. The US mint is currently looking at cheaper materials to produce nickels. It will be interesting to see what they come up with.
Problems with nickel hoarding
If you invest $10,000 in gold, based on today’s prices, you would have less than 7 ounces, which would be easy to store in your sock drawer. (Disclaimer: Due to the risk of theft, Dr. Planchet does not endorse storing gold in your sock drawer. Imagine the pleasant surprise for the thief that was only intending to steal socks). If you want $10,000 in nickels, they will weigh 2.2 tons. Storage will be a problem. Shipping nickels is much more difficult than shipping gold, although the US postal service has unwittingly provided a benefit with the flat rate priority mail boxes. Fill a box with nickels, ad you can send them across the country cheaply at the expense of the backs of the postal workers.
Acquiring nickels
Acquiring large numbers of nickels will be no easy task. Banks have become reluctant to give nickels in bulk. The number of nickels you receive in change will be negligible.
What about the cent?
Pre 1982 “pennies” are made of copper and now have a melt value over twice the face value. These cents are also worth hoarding if you can find enough to make it worthwhile. The pre 1982 (“good pennies”) have to be separated form the post 1982 “bad pennies” which can be a pain in the tuchus. The cents are even heavier and bulkier than the nickels. So don’t damage your house with the storage.