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Why are Premiums for Copper Bullion So High?

Provident Metals

Why are Premiums for Copper Bullion So High?

By ProvidentMetals on August 20, 2012 Filed Under: Featured Products, Gold & Silver Bullion Investing, Protecting your Wealth

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.)

The Answer?

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?

Take a look at our Copper Investment Knowledge Center, read our blog and browse our inventory of copper bullion for more information. You can also contact us directly or leave a quick question below.

Comments

  1. Matt says

    June 14, 2018 at 3:54 pm

    LOL

    The only people willing to pay these vendors outrageous mark ups are total morons.

    They hear, “Copper will raise 50% over the next two years!” and think, “Wow what a great investment!”

    Not realizing that even with a 50%, 100%, or EVEN 200% increase they STILL won’t be able to sell their bullion for what they paid.

    Don’t be an idiot, don’t waste your money on copper bullion.

    Reply
  2. Scott Gilbert says

    September 3, 2017 at 1:11 pm

    This is still bull and sounds more like an excuse. People are literally paying copper spot price for bags of pennies. How stupid is that?! I mean really think about it. I’ll melt my own copper bars and save a lot of $$$$$$$$$$$$$. My bars have no holes or pores at all I only use a little borax and who knows if I really need to even use that. Plaster of Paris some play sand and a metal bucket to mold your plaster and sand plus a hair dryer to blow air into the bucket all cost me about $30 and I melt my own copper and make beautiful bars. Talk about ripping people off hell I can go to my local scrap shop and pay exactly spot price for scrapped copper.

    Reply
  3. glen says

    October 29, 2014 at 7:35 pm

    I now understand why the bullion price is higher than spot price per pound.
    My question is …..how do I go about selling my 10 pound copper bars for more than spot price, unlike gold and silver I can go to any coin shop and they will pay me a little under spot price per ounce?
    Thanks
    Glen

    Reply

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