Winner on Both Sides of Market
August 05, 2008
One lucky institution is benefiting from the recession. It is the U.S. Mint. In the inflation panic that started about this time last year gold and silver sales rode higher and higher on the back of rising bullion prices.
Precious metals are supposed to be a hedge against inflation.
A year later, the recession fears seem to be taking over and the prices of base metals are declining. This is important for the Mint because it lowers the costs of the metals it uses in its coinage.
I have been writing for more than two years about the threat to the cent and the nickel because of the rising prices of the metals that go into them. The House of Representatives even acted earlier this year to mandate coated steel as a replacement for the current copper-coated zinc cent planchets and copper-nickel alloy planchets of the nickels.
Well, guess what? The nickel is very nearly worth a nickel of metal again. I checked the Coinflation.com Web site and the 75 percent copper, 25 percent nickel alloy now has a melt value of 5.118 cents. This certainly removes any danger of anyone trying to illegally melt the coins. The price of nickel peaked at about $24 a pound in the spring of 2007 and the value of the metals took the content up to almost 10 cents a coin.
The news is even better for the cent. It is now worth less than half its face value in metallic content, or .477 to be more precise.
The Coinflation.com Web site is even more precise than that. Check it out at http://www.coinflation.com/ .Zinc is roughly 80 cents a pound now and copper is $3.50.
Gold and silver might get most of the collector headlines, but it pays to look at the base metals from time to time to understand what the Mint may be thinking.
Bottom line: will these lower prices likely delay any changes in compositions? Probably. The Senate would need to act to press the coated-steel issue, but with everything else on its plate, why would it choose an issue that seems to be solving itself?
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