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 you're 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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