It depends on whether you are talking about its use value or its exchange value. Normally, the exchange value of a good used as money is equal to or greater than its use value. If the value of the metal in a nickel is only worth 3 cents melted down and sold in metal markets, you are better off using it in exchange rather than using it as a commodity. But when the use value exceeds the exchange value, the commodity money will go out of circulation. The U.S. mint has issued new regulations in an attempt to prevent this from happening to pennies and nickels:
Rising Metal Prices Prompt Ban on Melting and Export of Coins, by Matthew Healey, NY Times: The United States Mint, concerned that rising metal prices could lead to widespread recycling of pennies and nickels, has banned melting or exporting them. The Mint is also testing dozens of cheaper alternative metal compositions in the expectation that Congress will mandate a change when it meets in the new year.
According to calculations by the Mint, the metal value of pennies, which are made of copper-coated zinc, is now more than one cent. The metal value of 5-cent coins, made from a copper-nickel blend, is up to 7 cents. ... Until 1982, pennies were made of 95 percent copper. The commodity metal value of one of those coins, which still make up a large percentage of the pennies in circulation, is 2.13 cents...
If even 1 percent of the 150 billion pennies and 20 billion nickels in circulation were claimed for salvage, replacing them would cost taxpayers $43 million, the Mint estimates. In an interview ..., Edmund C. Moy, director of the Mint, said officials were aware of only a few people asking if it was legal to melt coins for their metal value. Without the ban, which takes effect tomorrow, it would be.
The new ban also forbids exporting pennies or nickels in any significant quantities. While the Mint is not concerned about tourists’ pocket change or numismatic collections, it wants to block wholesale export of coins to countries where recycling them for their metal content could be economically viable.
Penalties for violating the ban can include a $10,000 fine and up to five years in jail. “We want to make it clear to anyone considering this that it’s not worth it,” Mr. Moy said.
Drugs are illegal too. Start with $50.00 and purchase 1,000 nickels. Next, sell the 1,000 nickels for their metal content at 7 cents per nickel and collect $70.00. Use the proceeds to buy 1,400 nickels, sell the 1,400 nickels for $90.80, and you've nearly doubled you money already. It's unlikely that you'd receive the full 7 cents per nickel, but even at, say, 6 cents per nickel (so that the value is $72.00 instead of $90.80 after two rounds) there's a powerful incentive to smuggle nickels out of the country. And at 2.13 cents per pre-1982 penny, the incentive is even higher.
When the values are reversed, when the exchange value exceeds the use value, you're not allowed to go in the opposite direction either. For example, you cannot take 3 cents worth of metal and mint your own counterfeit ("plug") nickels and realize a 2 cent profit on each one. But when the economic incentive is high enough - e.g. turning paper into $20 bills - some people still try.