One of the most popular blog posts I have written was on “Collecting Nickels“. I can see the statistics and this particular post has been read a lot compared to other posts on my blog. That means that either it is not a widely discussed topic on the internet or a lot of people are searching it. If you type “collecting nickels” into google, my post is on the second page of ten.
In the post, I say that it is the one investment you can make that is a hedge against inflation and deflation at the same time. It is a hedge against deflation because it is the same as holding cash. Your purchasing power grows with deflation. With short-term interest rates right now at a fraction of a percent, the interest you would lose from not having it in a bank is negligible.
It is a hedge against inflation because of the metal content of the coin. If there is massive price inflation ahead, then metal prices will most likely go much higher. The metal content of the coins will increase and the coins will be worth far more than five cents.
So what about pennies? Pennies are actually quite similar. However, I see less attraction trying to collect pennies because it is even more bulky than trying to collect nickels.
There is a story on “Penny Hoarders” by ABC News. They ran a full story on it on “Nightline”. This story covers some serious collectors. This is a business to these people.
The story says to collect those that are dated 1982 or before. The reason is because of the metal content of the pennies. Pennies dated from 1982 and earlier are made with 95 percent copper.
This story also says, ” In what could be the biggest legislation to hit the U.S. Mint in 50 years, officials are now looking at the composition of pennies and nickels and considering an overhaul. If the laws change and the mint decides to abolish the penny, people would be free to melt them down for the copper.”
Regardless of whether the law is changed, we will see Gresham’s law take over and we will see older pennies and all nickels slowly go out of circulation. This is a very similar situation to pre-1965 dimes and quarters, which are made out of silver. They are held by people investing in silver. Holders of these silver coins would rather not melt them anyway, because they are easily identifiable as silver and they are in small denominations. I have written before on this subject too. I could see melting pennies as more attractive because of the low value of the metal content as compared to silver.
I am not sure that it will matter if the law is changed. Either way, if you have the time and patience (and space), go ahead and start collecting pennies along with your nickels. Pennies are more difficult, not just because of the space required, but also because you have to sort out the pre-1983 ones. However, it is practically a no-lose investment.