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Tuesday, September 10, 2013

Low Demand for Silver War Nickels Leads to Prices under Spot

Monday September 9, 2013

Recently I was chatting online with some fellow coin collectors and someone asked about prices he should sell some coins for.  The discussion moved to war nickels and I chimed in that war nickels usually trade for under spot, or value of silver in the coin, which sparked a small debate.

Another collector said that only dealers pay under spot for war nickels, but since we're all friends that would not apply.  This may be true, that we should always be fair to friends, but the fact is most of that statement is false.  War nickels almost always trade for under spot prices.

The 35% silver Jefferson nickel of the years 1942-1945 will almost always command a premium over the silver value if in brilliant uncirculated condition, but the majority of these coins are not in such wonderful shape.  The coins circulated during and after the war and can still be found in circulation today, recognizable by the large P, D or S over Monticello on the reverse of the coin.  Good to Very Fine examples are readily available but most of them display a very unattractive dark to black tarnish caused by the nine percent manganese mixed in the alloy for the coin along with the silver and copper.  This unattractive color may be why not many numismatic collectors will collect war nickels in lower grades, along with the fact that war nickels are fairly common and inexpensive in higher grades.  Low demand for these coins and high supply due to very high mintages leads to lower prices.

The fact that in circulated condition these coins are often covered in very unattractive dark toning may be one reason why these coins trade for under their silver value but another may be the content of silver in the coins.  The war nickel was set to be a 50/50 mix of silver and copper to save nickel for the war effort of World War II but instead was produced in 56 percent copper, 35 percent silver and nine percent manganese.  At just 35 percent silver, the war nickel has the lowest silver content of any United States' coin, right below 1965-1970 Kennedy Halves at 40 percent silver.  Forty percent silver Kennedy Halves may trade at or above their silver value but they are a higher percentage of silver and a much larger coin.  War nickels are much smaller with even less silver content making them not only unwanted to many collectors but also to investors in silver.  Silver investors like to get the most bang for their buck and they would need almost 18 war nickels compared to three 90 percent half dollars or about seven 40 percent half dollars for an ounce of pure silver.  The high amount of coins needed for virtually any silver content means these coins have very low demand from numismatists and silver investors alike.

The low demand and high supply of these coins leads to low prices, often under their silver value.  Added to this, the cost to melt the coins down and extract the silver would be high as it is more difficult to extract small amounts of silver and there would need to be a large amount melted to even get an ounce of silver.  Numismatists will buy war nickels but more often in higher grades since they are fairly inexpensive even in Mint State grades.  The low cost of these coins gives opportunities to young numismatists and collectors with a low budget to get obsolete numismatic coins for low prices or silver investors a precious metal for under spot value.  The demand for these coins may be low but it still exists and war nickels will always remind us about a time in our history when all of our country's resources went toward the war effort.

SOURCE: TheExchange