A penny saved - or melted?

May 14, 2006|By BILL BARNHART | BILL BARNHART,CHICAGO TRIBUNE

If your local congressperson offers you $100 to offset federal taxes on your gasoline purchases, do yourself a favor. Ask for the money in pennies.

As of late last week's trading in the futures markets, the value of the zinc and copper in a penny now exceeds 1 cent for the first time.

The metal price in a penny has not rallied enough to justify the cost of melting down the coins. Using the latest available futures prices for zinc and copper, the metal in the penny is worth $0.01016.

But the milestone means that just about everyone is carrying solid evidence of the historic rally in industrial metals prices that erupted this year.

Gold bugs, investors who are perpetually optimistic about higher gold prices, are now metal bugs.

At the end of last year, zinc futures were trading at 86 cents a pound and copper futures at $2.16 a pound. So far this year, zinc, which represents 97.5 percent of the metal in a penny, is up 80 percent, to $1.55 a pound. Copper, which is a 2.5 percent component of a penny, has gained 67 percent, to $3.61 a pound.

Add production costs that the U.S. Mint pays, and there's no doubt that the government is losing money on every penny, said James Bianco of Chicago-based Bianco Research.

"From 1959 to 1981 the penny was 95 percent copper," Bianco said. "If you find a green penny in your pocket, it's actually worth 3 cents," not counting collector value.

It might be time to retire the penny. A spokesman for the U.S. Mint said it's up to Congress to determine what coins are minted.

Last year, the Mint cranked out 7.7 billion pennies - more than the total of all the other coins it produced. And despite their metallic value, experts say it is not likely to pay to melt them down anytime soon.

Instead, most of the tiny coins disappear into dresser drawers, jars and piggy banks in the spirit of "a penny saved, a penny earned."

Bill Barnhart writes for the Chicago Tribune.

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