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Saturday, February 25, 2012

Using Inflation To Make More Gold In WoW

Inflation in WoW - Prepare or Lose
Inflation Basics In WoW
Inflation is a term that describes the erosion in purchasing power of a currency.  As more currency (gold in WoW) is readily available, prices tend to go up.  The resulting problem is that the value of that currency gets weaker as the same amount of currency can't buy as much as it used to be able to buy.  Inflation is a great threat to the value of your stockpile of liquid gold in World of Warcraft.  If you just sit on your gold from expansion to expansion, it loses value.  The same amount of gold will be able to buy you less in the future.

In·fla·tion - A persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency (opposed to deflation).

In World of Warcraft, the inflation gets worse as more expansions are released.  Quests give more gold, looted items sell for more, higher level character corpses loot for more coin, bosses and creatures drop more gold, and these all help contributed to more gold being more easily attainable.  Players start to have more personal gold than before, even if they are not using any ways to make gold in the auction house or with professions.  It's just simply easier to get more gold.  Since players can easily obtain more gold, they are able to spend more on the same items. 

Using Inflation To Make Extra Gold

Combating inflation is a strategy we must prepare for at the end of an expansion.  Liquid gold is affected most by inflation.  The value of the gold piece will continue to go down.  To combat the devaluing of the currency, we have to invest more of our liquid gold into commodities.  We can make an inflation hedge by buying commodities that we know will increase in value.  If we buy at today's price and sell at a future inflated price, we can not only make a profit, but we have protected that invested gold from the devaluing effects on inflation.  The key is to make inflation hedges with commodities that will rise in value.  Good examples are hard to obtain pets (think Argent Tourney pets), farmed commodities, rare mounts, etc.  Before the new expansion drops, we will be devoting an entire episode of Auction House Junkies to inflation and inflation hedging. 

The formula for using inflation to your own advantage is pretty straightforward.
Buy Materials Now At Today's Prices, Then Sell Your Crafted Goods At A Later Date At The Inflated Rate.
I will use my own Netherweave Bag stockpile as an example.

I stockpiled around 7-8 entire guild tabs full of Bolts of Netherweave Cloth during mid-Wrath of the Lich King.  I paid around 4-6 gold average per stack of Netherweave Cloth when I made the stockpile.  At the time Netherweave Bags were selling for 9-11 gold each.  Today, at Cataclysm's end I am still working off of that same massive stockpile that cost me much less than the current value of 8-12 gold per stack of Netherweave cloth.  Currently Netherweave Bags are selling for 15-25 gold each on my server.  So by forming a prepatch stockpile, I was able to lock in my crafting costs at the older cheaper rate.  I was (and still am) able to sell the resulting crafted items at the current new inflated rate.  And I can also undercut deeper than competitors who are stuck crafting from the current inflated materials rate. 

So have you started to think ahead to Mists of Pandaria and what items to be buying as your inflation hedges?


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6 comments:

  1. But if the crafted goods are worth more due to inflation, the gold you make from selling is worth less due to inflation, how do you know you've actually made a profit. You haven't actually made more money (In terms of its worth), you've just managed to stave off the effects of inflation - in other words you haven't made a profit from it, just prevented a loss.

    ReplyDelete
    Replies
    1. I'm not following your logic.

      I buy cheap materials now.
      Material prices Inflate.
      Sale price also inflates.
      I sell at new price with old crafting costs.
      Cheaper crafting costs plus higher sales price equals extra profits.

      Delete
    2. yes, but now the gold is worth less... so instead of having the same amount of gold and it buying less now you will have more gold but it would be able to buy the same things as before because their prices rose.

      Delete
    3. The gold won't be worth less until later on in the expansion when the inflation starts to hit. We are talking about long term inflation, not short time demand spike pricing.

      Inflation is caused over time by the increase in the ease of getting extra gold from basic tasks like vendoring loot, quest rewards, higher gold drops per mob looted, etc.

      It's also worth noting that inflation refers to the older pre-existing items, not the new expansion items.

      Delete
    4. The gold won't be worth less until later on in the expansion when the inflation starts to hit. We are talking about long term inflation, not short time demand spike pricing.

      Inflation is caused over time by the increase in the ease of getting extra gold from basic tasks like vendoring loot, quest rewards, higher gold drops per mob looted, etc.

      It's also worth noting that inflation refers to the older pre-existing items, not the new expansion items.

      Delete
  2. mwahaha, I feel lucky, it's the end of cata and I've sold 13 netherweave bags the past 2 days for 88g a pop!!! :D :D

    ReplyDelete

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