To further our discussion about copper as a viable investment option, we wanted to touch on a recurring question we get at Provident Metals.
Most people know that precious metal coins and bars come with premiums attached.
In other words, the actual price you pay for a silver coin (like the American Silver Eagle, for instance) is slightly higher than the base price of silver.
These premiums are due to a number of variables, such as the coin’s rarity or the costs associated with mining, processing and stamping the coin and then bringing it to market.
For gold and silver, these premiums are typically not much higher than the base metal price (for common bullion coins that is).
Yet copper is different. That’s why customers often contact our team with the Big Copper Question:
Why are the premiums for a specific copper coin or bar higher – as a percentage of the base metal price – than their more valuable gold and silver counterparts?
(Instead of hovering around 5% above their base metal price like gold and silver, copper premiums are often many times their base metal price.)
Copper’s high premiums can be attributed to two key factors: Quantity and Processing
Because copper is chiefly a metal of industry, gigantic quantities often change hands.
Copper’s current price of about $3.50 per pound, for instance, is the base price on “paper contracts” for the delivery of tons of copper – not just a few ounces or pounds (as is often the case with the copper coins and bars listed at Provident Metals’ online store).
If you’re looking to invest in a few ounces or pounds of copper, the spot price quickly becomes irrelevant as it does not account for the real price of bullion.
The other key factor contributing to copper’s high premiums (compared to gold and silver) is processing: copper’s inherent properties make it a difficult metal to work with.
Take gold and silver, for example. Each melts easily and neither of them oxidizes too easily.
Copper, on the other hand, immediately oxidizes when heat is applied.
Therefore, special techniques and chemicals are used to produce copper without bubbles or contaminants.
On top of these special (and expensive!) techniques, the final price for a one ounce copper coin or a one pound copper bar includes the sizing, stamping and shipping costs.
Helpful hint: considering these additional costs will be vital if you choose to sell your copper bullion stash. Do NOT rely on the base metal price – make SURE to factor in these added costs and premiums to ensure you receive a fair price.
Are there tips for avoiding this premium when I invest in copper?
Well, you could buy a few tons and store it in your pool. But we don’t recommend it.
A simpler way to invest in copper – minus the hefty premium – is to dig through your change jar. Pennies dated before 1982 contain 90% copper!
But when the trusty change jar disappoints, you can always purchase pre-1982 pennies through Provident Metals’ easy-to-use website. Of course you’ll still pay minimal premiums (mainly to cover dealer costs) but they won’t be nearly as high.
There are countless reasons to make copper bullion a part of your portfolio.
Like we mentioned last time, the price of copper is holding steady in comparison to gold and silver.
And even more importantly than its day-to-day movements, copper is a stellar option for barter – great for small purchases – should the need arise.
As the world economy flounders, coins with inherent or intrinsic value will be highly desirable when the metaphorical you-know-what hits the fan.
New to copper bullion investing and have a few more questions?