Saturday, May 14, 2011

Should You Buy Copper Rounds?

Today with the rising prices associated with gold and silver, some people are turning to the number #3 monetary metal - copper. The US government doesn't make any 100% (or close) copper coins anymore for collector's or circulation, and hasn't since the copper penny was phased out in 1982, so private companies are stepping in to meet the demand. The above picture of a copper American Silver Eagle - type round is just one example of the copper investment round in action. Other rounds featuring Ron Paul in copper have also been produced. Copper bars have made a rather heavy appearance on the scene as well.

So, should investors who haven't boarded the physical gold or silver trains to date hop the copper express? In a word - NO!

The first, and most obvious reasons for leaving copper out of your physical investments is painfully clear. At $3.99 USD a pound it makes silver at $35.44 per ounce seem like a lightweight! If you could actually buy copper for spot price you'd have to buy 4000 pounds worth of bars just to manage a modest $16,000 investment! That's twice the weight of a small car! Who wants to store a couple of cars worth of metal in their broom closet?

Secondly, investing in physical copper rounds and bars is cost-prohibitive. A one ounce round of copper goes for about $2.00 on ebay! That's 800% over the spot price of copper. Copper would have to rise to close to $32 a pound just to break even on such a so-called investment!

Thirdly, no clear route of resale. You can take gold and silver coins, bars, and rounds to numerous coin shops, internet sites, and refineries and sell your precious metals quickly and easily. With copper...not so much. I called Midwest Refineries to find out if I could sell any copper rounds or bars to them for cash...and the guy just burst out laughing! When he calmed down, he said it just wasn't anywhere near economically feasible to deal with relatively small amounts of copper in the refinery process. In fact, they bought huge log-like copper billets or enormous piles of scrap when they were running a copper melt. These billets often weighed 4200 pounds and up, and were delivered on a regular contract with a major copper producer.
Bottom line: the only way you'll be able to re-sell your copper rounds is if you can find other poor souls who are willing to make a bad investment to relieve you of your bad investment!

So, is getting on board the physical copper investment train a sound investment decision? Heck, no!

PS: 5/19/11 - I just received an email promoting copper rounds from the respected Gainesville Coins. Their selling point is that the coins are only $1.81 premium per coin. To those buying silver eagles and rounds that sounds on the surface to be a good deal. For example: Apmex is currently asking for a $5.00 premium above spot on American Silver Eagles (ASE's).

Once again, however, if you look closer the numbers just don't seem all that peachy. Firstly, the one ounce copper round has a current metal melt worth of $0.28 - so when you add in the premium you get to just over $2.00 per round. It's all just a sales smokescreen, though.

Bottom Line: you're paying about 800% over current copper price of about $4 a pound for your one ounce copper round. Copper would still have to climb to $32 per pound before your "investment" in copper bullion can break even. Your only hope of seeing any profit, or even just get your money back, means you're going to have to find a sucker willing to take the terrible investment off your hands.

Rick
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16 comments:

  1. One should indeed not buy copper rounds with these premiums.

    Good blog Rick!

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  2. Good analysis, Thank you :)

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  3. You brainless jellyfish are missing the point. Copper isn't only worth the premiums, they're practically going to be a requirement for barter and/or trade once the economy tanks. Do you really think that Mr. SmartGuy who collected silver or gold bars is going to be in a position to barter for necessary items? He's gonna need SMALLER denominations or else he'll be paying one bar each for a carton of milk or eggs. Copper is on the same periodic scale as gold and silver and is the only other colored metal besides gold and is infinitely more useful. Copper rounds is the way to go since the price of copper is now at an all-time high. Buy while you can!

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    1. Just save all the pennies you come across that are dated 1981 and older - those are almost pure copper and they cost one cent. At 3 grams per penny, $.10 buys you a troy ounce of copper. And a troy ounce of copper (as noted above) is worth about $.28 - an immediate $.18 return on investment. If only the government would let us melt them...

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    2. Correct. There won't be enough people holding gold or silver to support any meaningful barter/trade. First thing, if necessary, I'll use are copper rounds. I'm going to do my best to keep hidden my other metals. The fruit and vegetables will rot while they are waiting for the few PM holders to come forward. My copper is my SHTF insurance. My PM's are wealth storage.

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  4. Ouch! It sounds like somebody paid too much for their car insurance...or their copper rounds!

    Seriously, cool your jets, Sparky. If you really want copper at somewhere near melt pricing, then fill up your piggy bank with old pre-1982 pennies. At the current pricing copper would have to increase by a factor of eight just to BREAK EVEN on your investment! And it is important to make smart investments as well as doomsday prep, just in case the worst happens and the world never quite goes to hell.

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  5. Yeah....... Let me know where you can find a few pounds of those pre 81 copper pennies.

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    1. you can buy 100 dollars face value pre 82 copper pennies for around 170.00 on Ebay from several sellers. Since the copper penny is worth 2 cents in melt value its not a bad investment, but only if and when the ones holding our purse strings make it legal to do so. Junk silver coins in small denominations I think is the best investment in this current economy, and its legal to melt them. Wonder why? Copper is cheaper and can be made into bullets, thats why its illegal to melt them. Oh heavens no !! That might start an uprising against the government !!!! hahaha

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    2. I think the US Govt. continues to need the pennies and nickels in circulation coinage. Most people aren't even aware of the true value of an older penny or nickel, so they remain in circulation. Therefore melting them is illegal. Once the 90% silver coins were pulled out of the money supply when their silver content greatly exceeded their face value, the government had nothing left to lose. (See Gresham's Law - Bad Money Drives Out the Good).

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  6. The copper rounds make nice gifts and many are nice looking but they just are not worth their weight. If your collecting for a possible SHTF scenario, stick to "junk silver". If your worried about having small denominations, load up on Barber or Mercury dimes. The numbers have always favored silver over gold.

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  7. I have found that if one looks at the collectors market rather than the PM market, when it comes to copper rounds, you are better off. I have found the coins with Ron Paul to trade at a rather nice return as do the "legalize it" or any other cannabis reference coin. Buy in the $2 range online and resell at $3.50 - $4. Many who buy even at the $4 know the value of copper and know it is not an investment, it is a memento. The sucker who thinks it is an amazing deal is the one who gets to buy as many as they want at $3 each. Either way, I end up at the silver shop, and not with the copper!

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  8. I read an article about a guy who bought a million dollars worth of nickles. At best, his investment would yield profit due to the copper and nickel content . At worst, he still has a million dollars. ( a million dollars worth of nickels is extreme but you get the idea behind it)

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  9. A million dollars worth of nickels would weigh 220,460 pounds, and require at least five 45-foot trucks with lift gates to deliver! You're talking $40,000 just to deliver this cargo, and monthly rental fees for storage. Assuming you can find someone in the future to buy this colossal load of nickels, it'll cost someone yet another $40k!

    Sorry, the logistics of nickels is haywire and makes no sense. Silver is a perfectly affordable metal that has a significant upside. Along with gold people have been using them as money for 5000 years. If it's not broken, don't kill yourself coming up with outlandish fixes.

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  10. As with anything don't just buy. do some research. I bought my .999 pure copper 1oz rounds for .99 each. I didn't buy from the first web site google gave me. Yes they way we are headed they just may take the place of money. I for one don't wanna trade my silver for eggs. Cheaper items will bought with cheaper metals. I never bought mine to become a millionaire.

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  11. If you're buying copper...rounds or bars, think long term. if you're looking for a quick flip for cash, of course its a huge waste of money. Look around and buy smart, there are deals. I'm loading up on bars and rounds, AND copper pennies. One day its gonna be worth a lot...believe it! Just try to see through to the other side. There is real barter and trade value in copper. Research China and South America and their copper demands. A small amount to round out a physical metals portfolio, isn't going to hurt anything.
    Money wasted is titanium and tin bullion. No real barter or trade value and investment bullion is way too expensive, especially Titanium.
    Its stupid to do nothing and put all your money in to precious metals. A loaf of bread for gold? Sure, now there's using your noodle!

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