What will Copper and Nickel be "Worth" in the Future?

[beauanderos]

I was just reading a Jim Rickard's piece over on Silver Doctors (actually from the Sovereign Man conference in Chile last year) which put forth his view that gold could easily reach $7,000 an ounce (pending a reversion to a gold-backed currency) should we just base such a conversion on stated central bank gold reserves using conservatively (40% of calculated global M1 currency estimations) as a basis.

A one-to-one conversion of global M2 would actually result in gold being valued as high as $44,500 an ounce (so much QE globally ) ... BUT... as one reader points out... if as much as 90% of the Central Bank Gold holdings have been leased into the market... the real remaining gold might only be 10% of the stated reserves. Thus... drum roll, please... get ready for it... Gold could someday be valued at $445,000 an ounce.

Another reader pointed out:

"What I want to see is a professional estimation of values (trading ratios) for gold, silver and copper (the historic normal money composite) upon converting all banknotes (global ‘M-1′). This crap of ‘worship at the altar of gold’ is the elitist’s perspective that MUST by it’s nature, circle back around to this very same predicament, because it would physically take microscopic volumes of ‘gold money’ to conduct ‘street level trade’ under their scenario of a gold mono-metallic paradigm."

So what would current clad coinage, and intrinsically valued coinage - a nickel (current composition) or pre-1982 copper penny be worth if we were to convert to a new global standard gold-backed currency at some point in the future? It would be simplistic to assume that currently circulating coins would be abandoned because they had been tied to a no longer existing paper dollar (they'll still be needed to accomodate commerce), so I highly doubt they will be headed to the slag pile.

They would most likely, in my opinion, derive a new status of comprising the fractional component of the newly designated currency. Thus, my prediction is that our change would continue to be used on a daily basis, although freshly minted coinage thenceforth would reflect fractional valuation of the next paper currency, be it an SDR or some other designation.

What would result from this? Opportunity. Huge opportunity for the current hoarders of nickels and pennies. Such a revaluation, and continuation of the roles of current coinage, would provide an incredibly forceful impetus to pull the "more valuable" coins from circulation (Gresham's Law) and result (deja vu 1964) in the rapid disappearance of old copper pennies and current nickels (they'll replace them with plastic or some cheap composite).

Finally, back to their worth? From Coinflation.com we learn that based on current valuations, metals in pre-1982 pennies are already worth double their face value ($0.0212013) each, and those in a nickel worth close to face value ($0.0497031). In a world where gold has been revalued to $445,000 an ounce, an increase of over 347 times its current price... each penny could fetch you $7.28, while each nickel could represent $36.43.

Real money in your pocket. The irony being that, simultaneously, "old dollar" paper money - hundreds, fifties, twenties, tens, fives and ones - will litter the streets like so much trash. At least you can lick the chocolate from a crumpled old candy wrapper if you are starving, but the bills that now clutter our wallets will on that day become totally and utterly, completely and irrevocably, worthless.

So stack on, Folks. Copper pennies and copper/nickel alloy nickels have a place in any well-diversified precious and base metals stackers portfolio... and for some it's either a starting point or all they can afford. But if you have the foresight to begin now, someday your present holdings will be worth multiples of their present worth, and I'm referring to copper and nickel too, not just gold, silver, platinum and palladium.

[IdahoCopper]

If/when the Great Change ever occurs, something tells me that TPTB will have a squiggle in play that prevents you from paying off your mortgage with a half bucket of copper cents.

[Morsecode]

If/when the Great Change ever occurs, something tells me that TPTB will have a squiggle in play that prevents you from paying off your mortgage with a half bucket of copper cents.

My thoughts as well. I don't see the apocalypse/collapse being the best case scenario for metals. No way TPTB will allow 3% to basically be unaffected by whatever bad happens to the 97%.

[InfleXion]

The nice thing is that metals have value whether or not it is recognized by an established authority. You will be free to trade your gold, silver, and copper coins for other items with other individuals. It wouldn't be all that difficult to exchange into other mediums which are recognized.

Now if metals are made illegal then that complicates things a bit. Or if currency ends up becoming entirely digital and cash is outlawed then that also complicates things. If either occurs then you may want to reconsider the benefit of owning a house under that authority.

In a SHTF scenario where metals end up being revalued accordingly we'll also probably say goodbye to the dollar as we know it, for which maintaining appearances is the primary reason for suppression of metals. Without the need to dress up the dollar (or some other IOU based monopoly currency), the only other reason to keep metals down is to punish those who hold them, which is mostly central banks and governments anyway. If the goal is to punish the little fish, they'll have succeeded by duping people into thinking metals aren't worth having. More than likely your stack would just become your money. The powers could be in a state of disarray during this potential transition, and clamping down on what people barter with would be low on their list for a while. I'd be more concerned about what's waiting on the other side of the power shift when things start to come together again.

Ultimately metals are freedom to do commerce under any circumstances, with no promisary value, and that's what I like about them. Having them reach fair value would be great, but it's not the best reason to stack. I'm concerned that some folks only stack because they think it will be profitable. I'd rather not see weak hands enter the market if it just means they'll get burned when they get impatient, or get easily pushed out at a time when we need strong hands to hold down the fort. I definitely believe metals will be profitable, but I'm staying mentally prepared for the alternative.