Today's Guest Poster is Bozzor, all the way from Romania!
How to protect against Inflation and Deflation
Most people know what Inflation and Deflation are.Now, in WoW, we experience both of them and most of the times, even unaware, we are affected by them.Both of them are denting in your gold.In simple terms, Inflation is when prices are going up and Deflation is when prices are going down.
Now, unlike in real life, both Inflation and Deflation exist is same time in WoW, except that they are affecting different items.If you manage to understand how and why exactly Inflation and Deflation kicks in, you will at least protect your assets and gold (or make a lot of profit).
It is a known fact that every expansion and major patch bring along big spikes in the price of new items, due to the fact that everyone wants to skill-up their characters professions, get new gear, enchants, gems etc.There are not enough materials available in /trade or AH, the pro traders (and not only) are buying huge quantities of materials to skill-up their professions and be ready to use them while prices are extremely high (enchants, gem, buckles), farmers know that selling now is most profitable and keep their prices…All in all, its frenzy for like 2-3 weeks , before things begin to settle.
It is also a known fact that prices drops heavily before a new expansion or patch (depending on patch, some might go up, but not for long time).
Now, since between expansions and patches it is a considerable amount of time and any major changes in prices are taking place shortly before and after expansions / patches (hence the best opportunity to make profits or stockpile at very low prices), what are you going to do after those major changes, when Deflation will hit almost every new item ?
The answer is simple : Arbitrage (or Flipping as commonly known).The answer might be simple, but doing it it’s not that simple, because many will do the same thing.Once the craziness of every new expansion / patch starts dropping to normality, the prices also follow this pattern.However, you can safely flip items, because prices can vary 2-3 times / day or 2-3 times /week, depending on items.You need to understand that there are two major factors that drive prices : Farmers and Traders.
Farmers sell huge quantities of materials, lowering the price of base materials (ores, leather, herbs and cloth) while Traders buying those materials, craft items and sell at highest possible prices (except when they start undercutting wars on specific items).There are also times when the need for a specific crafting material rise and farmers are focusing on providing those materials, leaving a shortage for other (the farm more ores than leather, or more cloth than herbs, etc).
There are many influences on item prices, and only being prepared for when those times come, can protect you from Inflation and Deflation.The simplest things anyone can do is to skill-up their professions BEFORE leveling up and stockpile for long-term.
While skilling-up in first day (or days) of a new expansion its expensive, the benefits are much higher than the expenses.When Cataclysm went live, i spent 400k to max 5 professions (BS, JC, Alchemy, Enchanting and Inscription) in 3 days.However, in next 5 days i have made 800k selling crafted items from those professions.Same for Wrath (well, 200k spent and 400k made, but same profit mark, about 100%).
Stockpilling large amounts of previous expansion materials and wait until players start skilling-up their alts professions brought me a lot of gold, at 200-400% profit mark.
Doing only the above two things protects you from both Inflation and Deflation.Making huge amounts of gold in first weeks of new expansions and selling your stockpile slowly, at high profit marks it’s the least you can do.I agree, most cannot spend to skill-up 4,5 or 6 professions at once, but they can do it for at least one or two.Stockpiling, however, can be done by anyone, even if some can do it in thousands and other in hundreds of materials.
You need to find a balance between you gold and your stockpile.Be smart, have enough gold and enough stockpiled materials prepared for any new expansion / patch.I, for one, always try to keep a ratio of 75-80% gold in cash and 20-25% gold in stockpile.I have found that this ratio is the one that works the best.
I can’t cover all the specifics of how to fight Inflation and Deflation in WOW, it will took a lot of time and huge wall of text, not to mention that it will be hardly to understand (if it would be easy, anyone will have millions in WoW).
But the least i could do i did in this post.
Bozzor, Gold Multimillionaire.
You can read more of Bozzor's writings over at :- www.auctionhousegoldstrategies.wordpress.com