Gold Capped: Juggling the Volatiles market in Cataclysm
Every week, WoW Insider brings you Gold Capped, in which Basil "Euripides" Berntsen aims to show you how to make money on the auction house, and Insider Trader, which is all about professions. For Gold Capped's inside line on crafting for disenchanting, transmutation, cross-faction arbitrage and more, check in here every Thursday, and email Basil with your comments, questions or hate mail! This week's gold blogosphere post is BigJimm's post about profiting off the world events.
The new elemental crafting materials are called Volatiles. Volatile Earth, Volatile Air, Volatile Water, Volatile Life, and Volatile Fire are going to be by-products of herbalism, mining, and killing certain mobs. While they're technically farmable (unlike ore, skins, and herbs), the only way to farm Volatiles is to camp things that drop them or to collect them as by-products of mining or herbalism.
Let's look at the sources for each type of Volatile. Bear in mind that this is just beta information and thus is completely subject to change (as well as probably a little unreliable because of the small sample numbers).
Elementium Vein will contain Water, Earth, Fire, and Air Volatiles.
Pyrite Deposits will contain Fire and Air Volatiles.
Obsidium Deposits will contain Air and Earth Volatiles.
Herb nodes will all drop Volatile Life.
There are a variety of elemental mobs that drop all the Volatiles, the most farmable of which are in Twilight Highlands.
As you can see, Volatiles will be coming into the economy mostly through gatherers as a byproduct of what these farmers are actually looking for. This means that with the exception of players grinding specific mobs, there's going to be little flexibility of the supply.
The demand for everything is going to be enormous during the first part of Cataclysm, and since these Volatiles are a large portion of the mats for a significant slice of the most desirable crafted goods, they will be no exception. The demand will probably loosely track the leveling curve, actually. As more characters hit the points when they start wanting to purchase gear, gear enhancements, and consumables, the demand for Volatiles will increase proportionally.
Unfortunately for these characters, the supply side will not change as this happens -- in fact, as players get out of questing and start doing 5-mans, the amount of gathering done will probably decrease. I suspect that gatherers will be large contributors to the supply of Volatiles, and this will probably mean there will be a price spike across all the realms a couple of weeks into the expansion that will last until the demand for Volatiles is properly matched by the supply. Price is determined by supply and demand, so as these forces start pushing supply down and demand up, you can expect to see an increase in average prices. It's economics 101, and we've seen this before.
So when the volume of Volatiles listed in the AH is at a new low and every person who lists them for two times what they were going for a few weeks ago, what will you do? I'll tell you my plan.
Be a market maker
In every market (virtual or real), volatility is annoying. It causes problems for buyers because the stock they need might not be there when they need it, and it's annoying to sellers because there might be a huge glut of stock posted right after they list their hard-earned goods, forcing them to lower their prices. Middlemen are the answer: people who have the cash on hand to buy stock when there's tons of it for sale and hope to sell it for a higher price when stock is hard to come by.
Overall, middlemen benefit buyers and sellers. When the supply dries up, the buyers won't automatically buy whatever is posted on the AH; they'll make a decision about whether the increased price is worth being able to get their Volatiles now instead of having to wait until the next supply peak. Having a market maker buying and selling means that the buyers are less likely to have to pay outrageous prices for goods (or wait until there's a reasonably priced supply available again). It does means that they will have to pay slightly more when there's plenty of supply, because they will be competing with the market makers for the cheapest stock; however, this is far less annoying than not being able to buy Volatiles for less than twice what you were buying them for last week.
Sellers benefit when they're trying to sell in a supply peak; they won't have to undercut as hard to make a sale. They pay for this eventually, though, by not being able to gouge as easily, since days where they are the only game in town will be fewer and farther between.
Tips and tricks
If this sounds like something you want to do, here's some advice:
Make a point of checking market prices for Volatiles at least daily. Try to predict the swings, knowing that players tend to have weekly patterns.
Regardless of how clear your crystal ball is, get good at identifying when something is a good price and is worth buying.
Don't forget to factor volume in to your decisions. I'll sometimes buy above my threshold if it's enough volume and I'm reasonably certain that I'll be able to move them all next time there's a dry AH.
Remember that people won't buy something if they feel it's too expensive and that they can wait it out. You're better off moving 100 items at 15 percent above your cost than you are moving 10 items at 30 percent.
If you ever get a really good deal, consider leaving a small number of auctions unpurchased. It may result in someone undercutting them. Many people who sell things they earn as a by-product are not going to spend much time goofing around worrying about the optimal pricing strategy and will just undercut on auto-pilot.
Maximize your profits with more advice from Gold Capped, plus the author's Call to Auction podcast. Do you have questions about selling, reselling and building your financial empire on the auction house? Basil is now taking questions for a special series, "Ask an auctioneer," at basil@wow.com.
