Why are Americans hoarding nickels?

Some Americans have begun hoarding nickels in large quantities due to beliefs that their base metal value may exceed face value during high inflation, or that they will retain usefulness as currency if other denominations become worthless. While still a fringe investment strategy, nickel hoarding has gained some extra attention in recent years among "preppers" and others worried about economic instability.

As a numismatist who has studied coin market trends for over 20 years, I‘ve noticed an uptick in inquiries about buying nickel rolls in bulk. This curiosity makes sense in light of apocalyptic world events, but I always caution my fellow collectors to balance nickel hoarding with more conventional assets. In this guide, I‘ll analyze the complex dynamics around nickel values and examine why a modest allocation to nickels can blend well within a diversified portfolio, though extreme hoarding has risks.

A brief history of nickel hoarding

Nickels have inspired sporadic hoarding for over 150 years, often coinciding with times of financial uncertainty:

• The Civil War – Nickels were first introduced in 1866 to address shortages of other coins during the war. People had hoarded silver and gold coins as currencies fluctuated wildly. The new "nickel three-cent piece" answered the need for useful small change.

• The Depression – During the 1930s, people again hoarded precious metal coins out of economic fears. President Franklin Roosevelt had to temporarily suspend the gold standard.

• World War II – From 1942-1945, the mint changed nickel composition to silver (35%) and copper for preservation of strategic metals. People hoarded these "war nickels."

• 1960s coin shortage – Widespread hoarding of silver coins led to a coin shortage in the early 1960s. The mint temporarily removed all mint marks from coins, including nickels, to deter hoarding.

Based on past patterns, we can expect nickel hoarding to increase during any periods of prolonged inflation, financial crisis, or global instability. We seem to have entered such a period with current high inflation, market volatility, and pandemic aftershocks.

Why are people obsessed with hoarding nickels now?

1. Worries about inflation eroding value of cash

With inflation recently reaching a 40-year high, many Americans worry their cash savings will rapidly decline in purchasing power. The fixed denomination of the nickel has appeal as an inflation hedge.

However, most economists think inflation will cool in the next 1-2 years as supply chain issues ease. For example, the Federal Reserve has already begun raising interest rates which should strengthen the dollar over the long term.

2. Base metal value exceeds face value

The melt value of a nickel‘s metal content is currently worth about $0.06 based on copper and nickel futures prices, exceeding the $0.05 face value. Hoarders anticipate the gap widening.

However, nickel and copper prices fluctuate widely, so melt value could just as easily fall below face value again. Also, significant hoarding could depress metal prices by increasing supply.

3. Concerns dollars may become worthless

Some extreme "prepper" investors envision scenarios where dollars hyperinflate completely or even collapse in a Mad Max dystopia. They want nickels as a metal currency.

However, this is highly improbable in the world‘s largest economy. And if dollars did somehow become worthless, precious metals like gold and silver would likely hold value over base metals like nickel.

4. Appreciation potential of rare dates

While common nickels have negligible collectible value, rare and antique editions can rapidly appreciate. For example, an 1885 Liberty Head nickel recently sold for $288,000, and a 1913 Liberty Head edition once fetched $3.1 million.

However, chasing this kind of windfall is like playing the lottery. The chances of happening upon an extremely rare nickel in circulation are essentially zero. For the average nickel hoarder, metal value will be the only significant factor.

Which nickels are the most valuable?

While most nickels are worth face value, these highly coveted editions command big premiums from serious collectors:

Key date nickels

• 1913 Liberty Head nickel – 5 known examples, $2.5-$3.75 million range
• 1918/7-D Buffalo nickel (doubled die obverse) – 4 known, $300k+
• 1950-D Jefferson nickel (low mintage) – $25-$300+ for flawless uncirculated

Silver "war nickels"

• 1942-1945 Jefferson nickels (35% silver) – $1.25-$2.00+ per coin for precious metal value

Rare coins with mint errors

• 2004-D Peace nickel (struck on a Sacagawea planchet) – $75,000
• 2005-P Buffalo nickel (struck on Sacagawea planchet) – $15,000+

The demand and value for mint errors and exotic misprints has risen lately among collectors. But again, realistically finding any extremely rare coins in circulation would require sheer dumb luck. Most nickel hoarders can only expect to benefit from basic metal value.

Analyzing the pros and cons of nickel hoarding

Let‘s objectively weigh the potential upside against possible downsides of this strategy:

Pros

• Hedge against inflation if metal value rises
• Potential appreciation of rare dates
• Useful low denomination if dollars hyperinflate
• Solid base metal value floor

Cons

• Significant upfront capital needed
• Storage space and logistics
• No yield, unlike bonds/stocks
• Volatile commodity pricing
• New tech could reduce industrial nickel demand
• Extreme hoarding could seem eccentric

As with any investment fad, prudent portfolio allocation is wise. A Imited allocation to nickels as an inflation hedge could be reasonable. But making nickel hoarding your primary financial strategy seems unwise compared to owning assets like stocks, real estate, precious metals, etc. that provide income and growth potential.

Nickel hoarding FAQs

How many nickels make a roll?

Nickels are packaged in $2 rolls containing 40 nickels, totaling 200 nickels in a standard $10 box.

What is the heaviest US coin?

The US nickel is the heaviest compared to other currently circulating coins at 5 grams. Pennies weigh 2.5 grams, dimes 2.27 grams, and quarters 5.67 grams. Half-dollars were heavier at 11.34 grams, but haven‘t been commonly used since the 1960s.

What was the first nickel made of?

The first nickels minted from 1866-1867 were made of copper-nickel alloy (75% copper, 25% nickel). Nickels today have the same metallurgy.

How long would it take to open 48,000 boxes of nickels?

If opening 1 box of 40 nickels rolls took 2 minutes, then 48,000 boxes containing over 19 million nickels would take over 1,500 hours non-stop to open! This illustrates the impracticalities of hoarding beyond a reasonable amount.

When did nickel get so expensive?

Nickel prices remained stable around $4-8/lb for decades before rising sharply in the last few years. Key drivers are the adoption of nickel-heavy lithium batteries in electric vehicles and supply chain turmoil. But nickel has always been volatile, like most commodities. Long term forecasts vary widely among analysts.

Conclusion

History shows nickel hoarding tends to rise and fall with economic trends driven by fear and uncertainty. Today‘s high inflation has sparked the latest wave of hoarding among Americans worried about erosion of their cash savings. While buying some nickel rolls seems prudent as an inflation hedge, be wary of going overboard based on irrational doomsday fears or hopes of striking it rich with rare coins. Nickels deserve consideration within a balanced investment portfolio, but other assets probably warrant more weight in most contexts. With prudent diversification, a few rolls of nickels could provide an extra touch of stability without putting all your cents in one basket.