Tuesday, April 11, 2006

 

Coin Dilemma Highlights Currency Weakness

The Australian reports on an interesting turn of events. "It could soon be worthwhile for Americans to melt down their pennies for scrap, if zinc and copper prices continue their current rate of increase. Copper prices have risen 30 per cent this year, and zinc is up 55 per cent, a rise of about $US550 a tonne in a little more than three weeks. Another rise of the same magnitude would make the metal content in the US 1c coin worth more than its face value."

"There are 160 pennies in a pound, worth a face value of $US1.60. With each penny made of 97.5 per cent zinc and 2.5 per cent copper, based on current prices the metal value is worth about $US1.36. Therefore another 25c a pound rise in zinc, or about $US551 a tonne, would see the metal value of the US penny worth more than the monetary value."

"Market analysts do not rule out such a rise in the zinc price. 'Zinc prices have already risen further than what most people had ever thought but that is not to say there cannot be further gains,' said Ingrid Sternby, metals analyst at Barclays Capital. 'Could we see another $US500 on zinc? It's possible,' she said."

"But Ed Yardeni, who drew attention to the penny's rising scrap value, said: 'Don't bother melting the pennies just yet. However, at the rate that metal prices have soared since the end of last year, there might soon be an arbitrage play between pennies and zinc,' Mr Yardeni said."

"Europeans would not be facing the same dilemma as their US counterparts should prices continue to soar. Euro coins are mostly made of steel, which would require a doubling in the steel price before it would become economic to melt the 1c euro coin."

Comments:
Anyone holding pre-'82 one cent coins is way ahead (they were copper).I know it's a minor point but the U.S. has never minted a penny coin. Ours has always been a cent. Most folks walk right past a one cent coin on the ground, but not me! I was not a where that the europeans coin was made of steel.We did that for a brief period during the war(II) that is.
 
Thanks for pointing that out, I changed the title. When I was young, I collected the 'wheat' one cent coins and other by-gones from when the US currency held it's value. If anyone wants to know more history of the degrading fiat currency, go to a coin shop and ask to see old silver certificates, etc. What we call money is actually changing all the time. Remember a 'silver' dollar?
 
this link tells you the metal value of coins.

coinflation
 
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