"Bad money drives out good" said Gresham many years ago, and Gresham's Law still applies today. In fact, you can profit from Gresham's Law by following it.
As inflation eats away at the value of money, governments are forced to debase circulating coins to use cheaper materials. (Debasing is the process of substituting cheaper materials into coins with the same face value as before).
In the US, for example, inflation and rising copper prices caused the US Mint to stop making 95% copper pennies in 1982, switching to Zinc core pennies with a copper coating. Now the cost of the zinc in the penny (due to inflation) exceeds the value of the penny it is made of. We can expect that the US will either drop the penny, which is politically a problem because it admits to the inflation issue, or replace the materials in the penny with something even cheaper. In Canada the Royal Canadian Mint switched to a copper coated steel penny back in 2000, but the Americans have not yet followed suit.
Silver coins were phased out in the 1960's by most countries for similar reasons. The public and the Mints extracted the silver from circulation to the point that finding a silver coin still circulating is very rare. US Silver coins now trade openly at around the intrinsic silver value contained in the coins. If you have a bag of silver coins you can sell them on ebay or to any coin dealer very easily.
While it is hard to find wild silver, individuals can participate in extracting 95% copper coins from circulation and ultimately profit from the change in the penny composition from mostly copper to mostly zinc. This process is sometimes called "coin roll hunting" or CRH. By coin roll hunting you get the opportunity to invest in the valuable commodity copper at a big discount a few cents at a time.
(This article is copyrighted by its original author. Short excerpts with links are welcomed, but please do not repost the article itself. Thanks.)
Things You'll Need to Start Coin Roll Hunting
- Coins (some working capital)
- Several Bank Accounts
1 Ton of Copper Pennies
To start coin roll hunting you will first need to know which coins to hunt. You want to find which coins have more in metal value in them then the face value on the coin. Coinflation.com is a very helpful reference because it calculates the intrinsic value of circulating American and Canadian coins on a daily basis, updating based on the metal commodities markets. Realcent.org is an active forum dedicated to coin roll hunting with tons of helpful information.
You will be targeting older coins that are still circulating. The North American coins that are worth collecting are made of silver, copper and nickel or alloys of these metals. Zinc pennies may be worth more than face in theory but because the US Mint is still pumping them out there is no chance of a secondary market developing for zinc based pennies for a long time.
Popular target coins for coin roll hunting include:
US 95% Copper Pennies to part way through 1982
US 90% Silver Coins (dimes, quarters and halfs) to 1964
US 40% Silver 1/2 Dollars to 1970
Canadian 98% copper pennies to 1996
Canadian Pure Nickel 5 cent pieces to 1981
Canadian 80% Silver Coins (dimes, quarters) to 1967
Canadian 50% Silver Coins (dimes, quarters) from 1967 to 1968
How to Get Coins to Coin Roll Hunt
Repeat this process of buying coins at source bank branches and returning the rejects at dump bank branches. Over time you will build up a hoard of valuable base and precious metal coins for face value plus time invested that is worth more than the intrinsic value of the metal in the coins. You are also going to find other interesting collector coins and international coins while you search that will build up a nice coin collection.
Where to Sell Your Coin Roll Hunting Finds
If you can't afford to hold your base and precious metal coins as a long term investment, you can find an active market on eBay for copper, silver and nickel circulation coins that trade above face value. Like any market, prices depend on how the coins are marketed and on supply and demand. Many sellers of copper pennies use USPS flat rate boxes to move about $100 face in pennies in each transaction.
The realcent.org forum is a great place to trade all kinds of coins pulled from circulation. It is open to established and active forum members, but membership is free and there are no fees.
Any coin dealer, online or local, will buy circulated silver coins.