Dear Economist

Approaching meltdown

Dear Economist,

I have read in the pages of the FT that copper prices are now so high that copper coins are worth more as copper than as coins. Should I be breaking open the savings jar and melting down its contents?

Morris Kelvin, Aberdeen

Dear Mr Kelvin

It is perfectly true that the price of copper has recently been so high that the face value of a tonne of copper coins has been less than the price of a tonne of copper. You may have read this in the FT and erroneously concluded that coins are worth more as copper. In fact, the price of copper would have to move substantially higher before you consider melting your loose change.

What you have forgotten is that the price of copper can fall as well as rise. A piece of copper worth 1.1 pence may be worth 1.3 pence tomorrow, or 0.9 pence. A copper penny worth 1.1 pence as scrap may be worth 1.3 pence tomorrow but will never be worth less than a penny. When copper prices are very volatile – and they are – your best strategy is to hold on to the penny as a penny. You can cash in if prices rise still further, while knowing that a collapse on copper prices will not destroy the value of your penny.

Continued at ft.com

3rd of June, 2006Dear Economist • Comments off