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All of the latest Mists of Pandaria newsGold Capped: Staying ahead of inflation
by Fox Van Allen 
Aug 15th 2011 at 6:00PM
Do you remember the moment you hit 1 gold for the first time? I do. I was killing mobs in Ashenvale, vendoring Light Feathers and other various trash drops. It was an epic moment. That first piece of gold felt like so much money.
It wasn't a lot of money, of course -- it just felt like it. But still, it was worth a heck of a lot more than one piece of gold is worth today. The reason: Azeroth suffers from a constant state of hyperinflation. The purchasing power of 1g is always falling, and it's falling quickly.
Thankfully, though, you don't have to stand by and be a victim.
The inevitability of hyperinflation
In the "real world," inflation is an all-but-unavoidable fact of life. Forty years ago, the average home cost about $25,000. Today, the average home costs about $200,000. With a few limited exceptions (deflation does happen), prices are always increasing long term. And if prices are always increasing, that means the relative value of a single unit of currency is always decreasing.
Thankfully, in the United States, Canada, United Kingdom, and Australia, inflation has largely been in check in recent years -- maybe a couple of percent a year. Things are getting more expensive, but they're getting more expensive slowly.
That's not true everywhere, however. When Zimbabwe hit some tough economic times a few years ago, the government responded to the crisis by printing more money. And when inflation started to eat away at the value of that money, it printed more still. Zimbabwe was suffering from hyperinflation -- an economic crisis so dire that the purchasing power of their country's currency was getting cut in half every 24 hours. At Zimbabwe's absolute nadir, it printed these:
What does this have to do with World of Warcraft? Well, I'm glad you asked.
We don't have a central bank adding currency into the economy, but still, each and every day, there's more money in the economy than there was the day before. Down a raid boss? A few hundred gold gets added to the economy that didn't exist before. Run a random heroic? You just created 83g, 28s out of thin air -- and so did the four people you ran the instance with. Daily quests. Trash drops. All of it adds huge amounts of money into the Azerothian economy.
Azeroth isn't Zimbabwe, but the effect is the same. Constantly adding more and more currency into a market makes the existing currency worth less. And at the rate players are earning money now, the value of the Azerothian gold piece is in a freefall. A top-of-the-line, bleeding-edge epic might have cost 30,000 gold in Wrath of the Lich King; in patch 4.2, on my server, the latest-and-greatest epic cost 70,000 gold. And if that sounds bad, ask someone who played WoW during the days of vanilla how hard they worked to get the thousand gold needed for an epic mount.
Inflation in Azeroth. It exists, and it's brutal.
Whip inflation now
Don't expect the Orgrimmar Federal Reserve or Varian Wrynn-anomics to bail us out of Azerothian hyperinflation. It's a fact of the game, and it won't be going away. Still, that doesn't mean you just have to stand there and take it.
If you've got a decent store of money that you want to use in the future -- to buy new equipment the moment Mists of Pandaren (or whatever the new expansion is) drops, for example -- you don't have to just hold on to your money as gold. And though you can't buy stocks or bonds, you can still find some solid investment vehicles if you're creative enough.
What makes for a good in-game investment? Really, just about anything that's going to be harder to get in the future. If you're hard up for ideas, consider these:
WoW TCG mounts A lot of people play the WoW Trading Card Game because it's a fun way to bring Azeroth to the real world. That being said, another group of people buy TCG packs hoping to find loot cards -- cards with codes redeemable for unique in-game items. And some of the most sought after items from TCG are the bind-on-use mounts.Inevitably, old loot cards wind up being retired. Mounts like Reins of the Spectral Tiger, Mottled Drake, and Magic Rooster Egg get harder and harder to get. And if something is harder to get, the basic laws of supply and demand suggest that the value is only going to go up.
Some of these mounts are quite difficult to find on the auction house, but from time to time, they pop up. When they do, and provided you're looking to sock away a solid chunk of in-game cash, send the seller some in-game mail (or add him to your friends list and contact him directly in a whisper if he's online). That auction house list price is usually a shot in the dark by the seller; you can frequently negotiate the price way down.
Don't worry about insulting the seller with a lowball offer. If negotiations go south, you can always sign on using a different character and start fresh. Just be prepared to unload a lot of your bank account; TCG mounts often start around 100,000 gold and sometimes sell for much, much more.
Rare and exotic pets I love in-game pets. But I hate grinding to get them. And I sure as heck know that I'm not the only one.
Pet collectors are a pretty fanatical bunch. Rare drops like the Disgusting Oozeling and grind-heavy Argent Tournament pets like the Elwynn Lamb are always solid sellers. And they're only getting more expensive as time goes on. You don't have to grind them yourself, of course -- keep an eye out on the auction house for prices well under your server's average. Even if you're paying an amount near the market price, rest assured -- these aren't getting cheaper as time goes on.
The best part about these pets: While they're often expensive, they're not as expensive as TCG mounts. Many pets sell for a few thousand gold; others sell for just a few hundred.
Shadowmourne treasures When patch 3.3 landed, plenty of folks rushed to complete their Shadowmourne legendary. It was a great weapon, and it carried a bonus besides: If you killed the Lich King while someone in your party had it, the big bad would drop an Unsealed Chest. The treasures within could be exchanged for five different BOE items: Muradin's Favor, Jaina's Locket, Reins of the Crimson Deathcharger, Tabard of the Lightbringer, and Sylvanas' Music Box.
Some are more fun and desirable than others (I like Muradin's Favor best myself), but they all have one thing in common -- they're rare and only getting rarer. Only one Unsealed Chest dropped per Shadowmourne. And while it's still theoretically possible for new players to go through the trouble of creating a Shadowmourne and defeating the Lich King ... not a whole heck of a lot of guilds are going to do it.
It doesn't take a genius, then, to figure out that these items are going to appreciate in value. The overall supply continues to dwindle. Buy cheap, hold on to it, and then sell it down the road for a (hopefully) terrific profit.
... or, just hold on to your gold
None of the above investments are guaranteed. Past performance is no guarantee of future blah blah blah. But one thing is guaranteed -- holding on to large amounts of gold and not doing anything with it is a sure loser. After all, Azerothian inflation is easily over 100% a year.
Inflation wreaks havoc on savers. If you've got a bank account earning 1% interest while inflation is 2%, you're actually losing purchasing power as your bank account grows. And since there are no interest-bearing accounts in Azeroth (that's some sweet 0% interest your guild bank is earning), the purchasing power of the gold you have on hand is decreasing if you do nothing with it.
Hold on to your gold if you want. Just know that it'll never be worth as much as it is today. And while those large account balances are nice to look at ... in the long run, spending it now is better than saving it long term.
Maximize your profits with more advice from Gold Capped. Do you have questions about selling, reselling, and building your financial empire on the auction house? Fox and Basil are taking your questions at fox@wowinsider.com and basil@wowinsider.com.
Filed under: Economy, Gold Capped
Reader Comments (Page 3 of 3)
Cambro Aug 15th 2011 11:53PM
It seems like good advice for pushing yourself slightly ahead of the curve, but if you sell only one thing worth 35,000 gold between now and the next expansion and do nothing else, you'll be dirt poor. I think this is good for supplementing your game income, but if you want to have real buying power in the next expansion (even the next patch, depending on what it includes), it's smart to continually sell things now (with your crafting professions, providing services, arbitrage, buying in-demand items cheap and reselling) and let your wealth steadily accumulate.
Then prior to the next expansion (or patch), research what the new in-demand items will be, and start stockpiling them. Some things don't change; I made an absolute killing when 4.0 was released by stockpiling netherweave cloth, then crafting 16 slot bags for the huge influx of baby worgens, dwarf shamans, gnome priests, etc. People will want bags for new toons next expansion too, 4 at a time, and they'll be willing to pay a LOT for them...for a couple of weeks. Then they'll want the cloth more than the bags, so don't overcraft. :)
I'm curious how Blizzard will implement Cataclysm epic gems, if they will be prospected from pyrite ore, or a new ore (doubt that), or transmute from rare gems, or some other means. But I absolutely will not have a stock of Cata rares or even low qualities when the next expansion hits, they will be worthless unless I happen to find someone power-leveling their jewelcrafting. I ended up giving away most of my Wrath rare uncuts to guildies because I hung on to too many after 4.0, big mistake.
Luke Aug 16th 2011 12:37AM
I think this is an excellent point Cambro. I still sell netherweave bags and other items that have a steady market. With the exception of glyphs this is actually how I still make my gold. Of course you always have to be ready to move from one market to another. The work of an Auctioneer is never done.
Schadow Aug 16th 2011 12:03AM
A good way to keep ahead of inflation is to keep your money moving. Keep an eye out for high-volume, low-margin opportunities that allow you to keep a strong trickle of profit happening, and don't be afraid to invest big when opportunity knocks.
For example, with ore prices on my server regularly at 3.50 or more, if I see 200 stacks listed at 2.50, I buy all of them, because I know that I will turn it over for profit (unless there is some change to the game affecting supply or demand).
If you are nervous about processing that much, just re-sell some of it and process what you do feel comfortable with. However, I have never had an overflow like that where I have not regretted selling off the excess. If it makes sense to buy 20 stacks to process, then it will make sense to buy all 200 to process.
The important thing to note is that gold in your bank is not earning interest. If you want to keep your wealth up, put that gold to use on the AH. High-volume, low-margin markets tend to be resonably stable and profitable.
An example of one is turning ore into enchanting mats by jewelcrafting and disenchanting. The market for enchanting mats is huge, with room for lots of players in the market. It is unlikely to be destabilised by a lone undercutter. The supply of ore of late has been choked by people doing dailies instead of wasting time farming for me, but there is still enough around to keep me cycling through my gold and turning a profit.
Luke Aug 16th 2011 12:24AM
Sometime early in Wrath I stumbled upon stacks of thorium ore for 7g a stack (the typical cost on the AH ran between 40g and 70g). I bought out everything I found. Which ended up being about two bank tabs.
The problem is the price of the gems that drop from prospecting these ores plummeted almost immediately. And to this day has yet to recover. Sometimes the price goes up to a reasonable amount, but for the most part it never recovered.
Now being an alt-aholic and having access to Blacksmithing, Jewelcrafting and Alchemy means I was able to make a profit by creating arcanite bars and putting this ore to good use in many ways. But it took me nearly a year and a half to use it all up.
Just food for thought.
And probably a reason why bots also affect the in-game economy in terrible ways.
Puntable Aug 16th 2011 11:01AM
@Luke. If you still have that thorium, you should look at last week's gold capped blog comments.
Lsprof4 Aug 16th 2011 1:10AM
Nuts... I thought we were gonna share first gold stories...
Amaxe Aug 16th 2011 1:59AM
Interesting article but I'd make this comment.
In my experience, it's useful to have large reserves of gold for the necessary sinks of training for new skills and abilities. It can be risky to hold on to rare items... many people who had certain tomes, librams etc found they were essentially worthless when Blizzard announced certain abilities/tradeskills which formerly came from drops taught would be taught from a trainer.
Let's not forget the Insane rep grind where certain expensive drops suddenly became useless.
We have no idea whether Blizz might make something BOP we are speculating on. Or whether they might again arbitrarily remove something. The point is, you are gambling that your investment isn't going to be made worthless by a Blizz change to how things work.
(How many people were stockpiling runecloth for turnins for Gilneas rep?)
Not saying you're wrong here, and I may have missed your point. But I do think Gold will have a lot more value on the opening of Pandaria (or whatever) for purchasing power than you give it credit for.
amkosh Aug 16th 2011 3:13AM
Two points:
1) Is our buying power also falling? That's one thing that makes inflation really bad. I'm pretty sure the people back in vanilla that made 1k gold could do so now much easier, so in essence their income has increased naturally. Of course this still hurts the savers...
2) I'd be careful of using any niche item (specific examples above would be tcg mounts/pets, grind intensive mounts) as there is a good amount of risk. Sure do it if you want, but be very very careful. That spectral tiger mount will not likely go down because of supply, unless of course Blizzard puts a mount like it up on the pet store, which is possible. Blizzard is going to be looking to reclaim lost revenue for the loss of subscribers, and that would be a relatively easy way to do so. And even if they do not do this, if the trend of players leaving continues that will naturally lower demand which will lower value.
In order to sell the niche item you need a buyer who has the money and is willing to part with it at the cost you're selling. You're gambling that you will either profit, or the loss on the sale won't be bigger than the loss due to inflation. My recommendation at least right now would be to hold gold liquid, and I make that recommendation based on that the loss from inflation is at least predictable, whereas the other potential loss could be anything. Also, the inflation will lessen a bit because of the loss of subscribers.
Of course if the subscriber counts do an about face or you're on a high pop server, then the other may work. It also may work if you're a gambling person...
Cetan Aug 16th 2011 5:26AM
Watching gold spammers over the years, I've been tracking inflation that way.
Patch 1.4: $10 got you around 50G.
Patch 4.2: $10 gets you around 6000G.
12000% inflation over the years.
Coleman Aug 16th 2011 10:31AM
That's 120%.
Coleman Aug 16th 2011 10:34AM
Nevermind, I am an idiot. Move along, nothing to see here...
bdew Aug 16th 2011 7:36AM
I'm not really seeing any massive inflation in Cata, nothing like in WotLK or back in BC.
Maybe it's people on my server loving to waste their money on the various goldsinks, but the prices on most stuff didn't increase over from wrath.
Most resources and consumables even dropped in price, for example most common ore and herbs go for 10-15g/stack, back towards the end of wrath 20-30g/stack was normal.
When BC went live i pretty much was broke in game, so fighting inflation wasn't an issue for me. Before wrath i invested most of my money in buying cheap herbs and once 3.0 hit the servers i made some really ridiculous profit on inscription (and just selling those herbs).
When Cata came i just kept my money and i don't feel i lost anything so far.
Toast Aug 16th 2011 12:31PM
First and foremost, there is always a large sum of money leaving the system by way of the AH "tax" to sellers. So while quests, raids, etc. are adding gold to the system, the AH "tax" is taking some of it back.
Second - if your guild is raiding, then in addition to large repair bills (especially when learning new bosses), you also have the expense of all the one-time consumables. That is, unless you are farming the mats for every flask you need e.g. flask of the winds, and/or for food e.g. Skewered eel, Fortune cookies, etc. then there is always a large outlay of gold. For example, a 10-man multiple attempt on a single FL boss could run the guild 3000+ gold.
More than anything else, it's my opinion that WoW inflation is rooted in those players who would rather "have it now" then to bid and wait. That is, I often see items on the AH that can be had for significantly less than the "buy now" price, yet it's seldom you'll see bidding. Even on my own items in the AH, I'm amazed at what people will pay to have it immediately.
Bottom line, inflation wouldn't be a problem if people could wait... but... when you have to wait up to 48 hours for a bid item, and you want that item for your weekend WoW'ing, or just need the matt to complete an achievement, all common sense goes out the window and you'll pay 50K for a Lava Bolt x-bow when you could bid and potentially get it for only 30K. When there is a never ending supply of players that will "pay whatever it takes" to have the best items, then of course the cost of those items will continue to climb.
Last but not least - don't think Blizzard can't (or isn't) influencing the economy - There needs to be enough gold in the system to make the wheels go around in a realm, and it wouldn't surprise me at all to see, for example, the spawn times for materials and/or the drop amount of gold influenced by what's already in the economy.
Bond Aug 17th 2011 11:02AM
I don't believe that the fact that an analogy is imperfect necessarily removes the benefit from making the comparison. Indeed, WoW's economy is manufactured and could be diddle with by Blizzard any time it wants to. They are not doing so because the gold inflation has no significant effect on game play. Yes, your vast savings today will seem small in comparison to market costs in the next expansion, but then again the cost of a Weak Flux or Rune of Teleportation is not changing. In fact, Blizzard has trended towards reducing production costs by eliminating materials (such as herbs from most cooking recipes) which drops the fixed cost of production for items. If they wanted a true inflationary spiral, Blizzard would increase the cost of all of those vendor items by a floating percentage based on the total gold supply available on that server.
The point of the article, is that if you want a way to preserve your "wealth" in-game through the next expansion, buying very rare or soon to be rare items and then hoarding them to be sold at a later time IS an excellent way to maintain the relative value of your savings, in the same way that gold is a safe-haven from inflation in the real world. (And boy, wouldn't we all like a time machine to go back to when gold was considered outrageously overpriced at $300 an ounce?) Another great example is Ruby Shades, which went from 2,000g vendor price to 5c to removed from the vendor (Haris Pilton in Shattrah). It was a silly little vanity item, marginally useful for twinks, and it has the same character appearance as 10 other items still in the game, but people still list them on the AH for 10,000g+. Is there a significant market for that item? Who knows, but if one person on your server wants one and you have it, that is all you need. I am certain that those of us who did not buy one for the 5c price and hold on to it wish that we did.
Anyways, I find these thinking pieces to be very useful, not so much in the specific recommendations as in prompting my own separate thought process. Having accumulated some significant funds in the game, what do I now do with it? I think the idea bears some consideration, and I appreciate the reminder. That is why I read these columns, not for a blueprint on what to do, but for the spark of an idea I will devise myself. A nice read, Fox!