Gold Capped: The downside of hoarding
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 making money in-game, check in here every Thursday, and email Basil with your comments, questions or hate mail!
In the beginning of an expansion, a lot of people tend to hoard goods for later. A herbalist friend of mine gathered his heart out for the first two days of Cataclysm and managed to produce something like 50 stacks of herbs. His plan for it was to use some of it on maxing out alchemy and then hold onto the rest so he could level inscription at some future point. We started talking, and it became apparent that he was aware that the price of herbs was high and would likely be much lower in a couple of weeks.
This is not unique. Most people who end up with enough gatherable materials that they have to decide what to do with apparently default to hoarding it for future use instead of using it immediately or selling it -- even if they know that the value of their mats will be lower by the time they use it.
Let's start off by making sure we're all in agreement about one thing: If you can sell a stack of herbs for 230g now, even if you farmed them, the 60-something stacks you need to max out inscription cost you 13,800g. This is a concept called opportunity cost. The herbs you farmed didn't cost you anything, but the opportunity cost of using them to level inscription is what you could have sold them for. If you have the ability to turn them into something valued at more than 230g a stack (for example, through being a scribe), then your opportunity cost is even higher than the auction house price of the raw mats.
Now, if being one of the first 525 skill inscriptionistrixtrivenors is worth 13,000+ gold to you, then good for you. Getting one of the first jewelcrafters was definitely worth it for me -- having a lead on the JC tokens allows me to have my fingers in more markets sooner than my competition, so I was willing to level it while ore was above 250g a stack.
I actually ended up with more ore than I needed to finish leveling. Instead of keeping it, however, I put it back up on the AH, and it sold immediately. I reasoned that unless I was willing to use it right away, keeping it in my bags unprocessed would do nothing but ensure that I lost money when I sold or used it.
Prices go down
While items go up and down a little over the course of a day, the general trend is down.
As more goods are farmed, there are fewer people left who need to level professions, so the demand naturally lowers over time.
As more and more people finish the high-priority leveling grind, they're more likely to start gathering so they can level their lower-priority professions, as well as fund their high-priority preraid craftables. This contributes to supply.
So knowing that, barring events like the Darkmoon Faire that temporarily increase demand for some things, goods will be generally worth less the longer you hold them. The logical course of action, then, is to avoid holding them.
Now, I'm not necessarily advocating avoiding buying goods until their prices lower -- but whatever you do, don't hold them "for later." Sell them, and use the money you earned to buy more later. If you buy something now for a trade skill and don't use it, it's safer to get your money back than it is to hold it. If you farm something now but don't have time to use it right away, sell it and use that money to buy more of whatever you farmed when you're ready.
Think of it as loaning your valuables to the auction house.
Why do people hoard?
The instinct to hold onto to some valuable you acquire is a pretty strong one, and it's hard to get away from. People sometimes feel nervous letting things go if all they're getting in return is money, an abstract number. You can look at a stack of Obsidium Ore in your bags, but the gold you can buy one with is just a different number at the bottom of your bags. It doesn't always feel like you'll be able to get that ore back. Also, that gold is rolled together with all the other stuff you've "loaned to the AH."
Another factor that plays a large part in this is market volatility. When the prices change drastically over a short period of time (like in the beginning of a new expansion), peoples' internal sense of "fair" (read: historic) prices haven't yet been solidified. The market value for items are based purely off supply and demand. Even people who are usually not averse to participating in the open market will tend to want to avoid it when they have no sense of familiarity or value that they can use to make decisions.
Lastly, I suspect that it's a strange little artifact of human psychology. It takes a fair amount of cognitive dissonance to know that all your leather or whatever is going to cost less in a week, but not be willing to sell it now to avoid taking that loss. Despite this, hoarding happens all the time.
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 taking your questions at basil@wow.com.
