U.S. Penny Phase‑Out: What Investors Need to Know About the Final 1‑Cent Coin

Introduction

When the last penny rolls off the press at the Philadelphia Mint, it marks the end of a 230‑year chapter in American currency history. But the significance of this moment extends far beyond nostalgia—it signals a shift in metal markets, cash‑handling costs, and the broader trajectory of digital payments. For investors, the final minting of the U.S. 1‑cent coin offers a rare glimpse into how a seemingly trivial denomination can influence seigniorage, commodity prices, and even consumer‑price dynamics. This article dissects the financial implications of the penny’s demise, outlines strategic opportunities, and provides a risk‑adjusted roadmap for portfolio managers and individual investors alike.

Market Impact & Implications

The Economics of a One‑Cent Coin

Metric	Figure (2023)
Face value per penny	$0.01
Production cost per penny	$0.0162
Annual penny output (approx.)	7.5 billion
Yearly cost to Treasury	~$48 million

The United States Mint has spent more than $16 cents to produce each penny, a cost that eclipses its nominal value by 162 %. Over the last decade, the cumulative fiscal drain from pennies alone has topped $500 million, a figure that persistent budget hawks have labeled “wasteful seigniorage”.

Metal Commodities: Copper and Zinc

A modern penny is a zinc core (97.5 %) plated with a thin copper coating (2.5 %). The U.S. Mint consumes roughly 8 million pounds of copper and 12 million pounds of zinc annually for penny production. While these volumes are modest compared to global demand—copper usage exceeds 22 million metric tons yearly—the shift away from minting pennies reallocates metal supply, potentially nudging spot prices.

• Copper: In 2024, copper hovered around $4.00 per lb. A reduction of 8 million lbs removes roughly $32 million of demand from the market.
• Zinc: Zinc price in 2024 averaged $1.40 per lb, implying a removed demand value of about $16.8 million.

Even marginal supply adjustments can amplify price movements in tight markets. Historical precedents—such as the 2011 U.S. nickel phase‑out proposal—showed copper prices climbing 2‑3 % on speculation alone.

Rounding and Consumer Pricing

When a currency no longer carries a sub‑cent denomination, retailers must round transaction totals to the nearest five cents (or, in some jurisdictions, to the nearest whole cent). Economic models suggest rounding can produce a net inflationary effect of 0.2 %–0.4 %, depending on consumer purchase patterns. While seemingly minor, this “round‑up” effect compounds across the $20 trillion U.S. consumer‑spending base, potentially adding $40‑$80 billion to nominal GDP over a decade.

Cash‑Handling and Banking Costs

Banks and retailers incur significant expenses maintaining cash inventories. The Bureau of the Census estimates that cash‑handling costs amount to 1.4 % of total retail sales. Eliminating pennies trims the volume of low‑value cash, offering an estimated $150 million annual savings for the banking sector alone. Those savings could translate into higher profit margins for large‑scale cash processors and logistics firms.

International Comparisons

Canada eliminated its 1‑cent coin in 2012, Australia in 1992, and the Eurozone has minimal usage of 1‑cent coins. Post‑phase‑out analyses reveal:

• Reduced minting expenses: Canada saved C$93 million over five years.
• Stable inflation: Rounding effects remained statistically insignificant.
• Consumer acceptance: Over 80 % of shoppers adjusted without complaint after a brief education period.

These case studies provide a benchmark for projecting U.S. outcomes, suggesting that while micro‑level frictions exist, macro‑level disruptions are limited.

What This Means for Investors

1. Re‑evaluate Commodity Exposure

• Copper & Zinc ETFs: Funds such as COPX (iPath Series B Bloomberg Copper Subindex Total Return) and ZNT (SPDR Bloomberg Bloomberg ZINC) may experience price upticks as demand re‑allocates toward industrial use.
• Physical Metal Holdings: Investors holding physical copper or zinc can benefit from reduced government competition for these raw materials.

2. Shift Toward Digital Payment Platforms

With pennies disappearing, price‑point granularity leans toward digital transaction methods that accommodate exact‑cent pricing without physical cash constraints. Companies at the forefront—Visa (V), Mastercard (MA), PayPal (PYPL), and Square (SQ)—could see improved transaction volumes and higher fee revenue.

3. Capitalize on Rounding‑Revenue Models

Fintech firms offering round‑up investing (e.g., Acorns, Stash) may capture additional assets under management as consumers' cash purchases round up to the nearest five cents, automatically investing the spare change. These platforms often charge a 0.25 %‑0.50 % management fee, translating to meaningful revenue with increased user adoption.

4. Explore Collectibles & Numismatic Markets

The final penny minted is a historical artifact. Auctions for the last 1‑cent coin are projected to fetch $10,000‑$20,000 for pristine specimens. Numismatic ETFs—though niche—could experience a short‑term demand spike from collectors seeking to own a piece of monetary history.

5. Rethink Cash‑Intensive Business Models

Retailers heavily reliant on cash—convenience stores, gas stations, and quick‑service restaurants—face a diminishing need for low‑denomination change. Companies investing in automated cash‑handling solutions (e.g., NCR Corp., Diebold Nixdorf) may see higher adoption rates, improving earnings guidance.

Risk Assessment

Risk Factor	Potential Impact	Mitigation
Commodity Volatility	Copper and zinc prices could swing sharply due to global supply constraints unrelated to penny elimination.	Maintain diversified exposure via broad‑based metal ETFs and hedge with futures contracts.
Legislative Reversal	A future Congress could reinstate the penny in response to consumer backlash.	Monitor congressional hearings; keep a portion of metal exposure liquid to adjust quickly.
Consumer Sentiment	Perceived “price‑gouging” from rounding may depress retail sales.	Focus on sectors less price‑sensitive (e.g., digital services, B2B).
Technological Adoption Lag	Slow transition to digital payments could prolong cash usage, mitigating anticipated savings.	Invest in companies offering both cash‑handling and digital solutions, ensuring coverage of hybrid environments.
Inflationary Rounding	Rounding could marginally increase CPI, influencing Fed policy.	Track CPI components; adjust fixed‑income positions if monetary tightening becomes probable.

Overall, the systemic risk linked directly to the penny’s phase‑out remains low to moderate. The most pronounced uncertainties stem from commodity price shocks and political reversals, both of which are manageable within a diversified portfolio.

Investment Opportunities

1. Metal‑Focused Exchange‑Traded Funds (ETFs)

• iPath Series B Bloomberg Copper Subindex Total Return (COPX) – Provides exposure to copper futures, capitalizing on any upward price pressure from reduced mint demand.
• Invesco DB Base Metals Fund (DBB) – Tracks a basket of copper, zinc, and nickel, offering broader diversification across the base‑metal sector.

2. Fintech & Digital Payment Leaders

Company	Ticker	Rationale
Visa	V	Global payments processor with a deep‑pocketed merchant network; stands to benefit from higher transaction volume and reduced reliance on cash.
Mastercard	MA	Similar to Visa, with a strong foothold in contactless and mobile payments that align with a cash‑light future.
PayPal	PYPL	Expanding into instant‑transfer and QR‑code payments, appealing to small‑ticket merchants that previously used pennies.
Block (formerly Square)	SQ	Offers POS hardware that automates cash handling; the shift away from pennies reduces hardware wear‑and‑tear and improves margins.

3. Rounding‑Revenue Platforms

• Acorns (private) – Accumulates spare change via round‑up features; expected user base growth post‑penny elimination.
• Stash (private) – Similar model, with added micro‑investment options; warrants monitoring of private‑round funding rounds.

4. Numismatic Auctions & Specialty Funds

Auction houses like Heritage Auctions and Sotheby’s are already listing the final penny as a “collector’s item”. Investors with an eye for rare assets may allocate up to 1 % of portfolio to high‑value collectibles, acknowledging the low‑liquidity but high‑upside nature.

5. Cash‑Processing Equipment Manufacturers

• NCR Corp. (NCR) – Supplies ATMs and cash‑recycling machines; may see increased orders as banks streamline cash inventories around the new rounding standards.
• Diebold Nixdorf (DBD) – Provides similar solutions; a strategic partnership with large retail chains could boost revenue streams.

Expert Analysis

“The discontinuation of a low‑denomination coin is a textbook case of optimal currency unit theory: when the cost of producing a monetary unit exceeds its transactional utility, the state should retire it.” – Dr. Elaine Torres, Professor of Monetary Economics, University of Chicago.

Seigniorage and Fiscal Impact

Seigniorage—the profit a government earns by issuing currency—has been negative for the penny for decades. By halting production, the Treasury can recoup an estimated $10 million in annual savings, directly improving the budget deficit. While modest relative to the $1.4 trillion annual federal deficit, the savings represent a symbolic win for fiscal discipline and may embolden further efficiency reforms (e.g., digitization of federal disbursements).

Transaction‑Cost Economics

Small‑value coins impose transaction costs on both consumers and businesses, a friction that digital payments eliminate. Studies from the Journal of Economic Perspectives estimate that cash‑only transactions cost retailers 0.5 %–1 % more than electronic payments. Scaling these savings across the U.S. economy could generate hundreds of billions in productivity gains over a ten‑year horizon.

Macro‑Economic Outlook

While the penny’s exit is unlikely to be a catalyst for inflation, the rounding mechanism introduces a micro‑inflationary bias that is statistically negligible. However, the broader trend toward a cash‑lighter society dovetails with the Fed’s long‑term goal of a high‑velocity, low‑cost payment system, supporting the central bank’s digital dollar initiatives.

Key Takeaways

• Production Cost vs. Face Value: Each penny costs $0.0162 to mint, exceeding its $0.01 face value by 162 %.
• Metal Supply Shift: Eliminating pennies reduces annual demand for ~8 million lbs of copper and ~12 million lbs of zinc, potentially nudging commodity prices higher.
• Rounding Effects: Transaction rounding may add 0.2 %–0.4 % to consumer price inflation, a negligible macro impact but a tangible micro‑economic consideration.
• Investor Strategies:
  • Increase exposure to copper and zinc ETFs.
  • Allocate capital to digital payment processors (Visa, Mastercard, PayPal, Block).
  • Consider round‑up fintech platforms for ancillary growth.
  • Explore numismatic market opportunities for rare pennies.
• Risks: Commodity volatility, potential legislative reversal, consumer sentiment regarding rounding, and uneven adoption of digital payments.
• Long‑Term Outlook: The penny phase‑out aligns with a broader cash‑to‑digital transition, underpinning future FinTech innovation and government efficiency initiatives.

Final Thoughts

The final U.S. penny may be a small metal disc, but its retirement reflects a significant evolution in monetary policy, market dynamics, and investor opportunity. By understanding the fiscal rationale, the ripple effects on commodity markets, and the burgeoning demand for digital payment infrastructure, investors can position themselves to capture value creation while mitigating associated risks. As the nation moves toward a more efficient, cash‑light economy, the strategic themes highlighted here—metal exposure, fintech adoption, and niche collectibles—will likely shape portfolio decisions for the next decade. Keeping an eye on policy developments, commodity trends, and consumer behavior will ensure that when the next coin disappears, your investment strategy remains future‑ready.