Saturday, January 15, 2011

What's Going on With Rare Gems?

If your server is anything like mine (and from what I've been hearing, it probably is), rare gems are going for next to nothing, as are the rare gem cuts. While some still hold decent value (Delicate Inferno Ruby), others (Solid Ocean Sapphire) are selling for laughably small amounts. Thankfully, profit can be made because plenty of the cuts still sell for more than the raw mats, but profit margins can be quite slim at times, even to the point where it really doesn't seem worth it.

So what's going on? Given that the stats on these are significantly better than even epic LK gems, one would expect them to sell for a lot more too. But that doesn't seem to be the case, as prices just keep dropping and dropping. The funny thing is, I don't think the prices have anything to do with what players are willing to pay for the gems. My guess is that a combination of over-prospecting and the "I farmed it, so it's free" mentality are causing sellers to severely undervalue what these gems are worth.



Even someone who casually prospects ore will quickly realize that Obsidium gives more greens, and Elementium gives more rares. And since prospecting for the greens is by itself amazingly profitable, if you prospect enough ore, you're going to wind up with a lot of extra blue gems. Mining also gives you a chance to pick up some rare gems from nodes, so if you mine a lot of ore (and this certainly seems to be the case for a lot of people), you're also going to get a decent amount of blue gems. This explains why most of the raw gems are so cheap; high supply, people dump them in the AH, and they're gradually undercut down because not enough people are buying gems off the AH, seeing as they have so many left over from prospecting.

Theoretically, this should also explain the low prices for rare cuts in the AH. Lower mat costs means lower threshold where you can still make profit, so people can keep undercutting each other while waiting for the gems to sell, and if they don't sell fast enough, the undercutting will cascade toward the bottom. The strange thing is, at least on my server this does not seem to be the case. Gems sell quite quickly for me, sometimes even selling out of a cut before I have time to cut more to replace them! The problem is, people on my server do not undercut smartly. I can go to almost any cut, look at the prices, and guarantee you that someone has undercut their next highest seller by 20g or more. And it's not uncommon to see someone undercut that price by an equally large margin! So what might start as a 150g cut has been reduced to 70g by just a few sellers. And this is where I get lost trying to figure out what people are thinking.

To be fair, undercutting your competition by just a few silver isn't always the best plan if your competition has her goods priced way above market value and what reasonable people normally pay. In that case, it is necessary to undercut somewhat severely so you can actually sell your stuff. But the thing is, people are willing to pay quite a bit for these gems! On a few occasions, I have pounced on some rare cuts markets that had only a few gems listed, bought them out, and re-listed at much more than the were. For example, I bought out four Ember Shadowspirit Diamonds at 250g each, and re-listed at 500g. Same with Reckless Ember Topaz: bought for 60g, put up for 200g. And you know what? They sold, and they sold rather quickly. And less than twelve hours later, people had crashed the market right back down to where it was before.

So again, what is going through these people's heads? Why undercut by such a huge margin when a slight undercut will do just as well and get you, and everyone else, more gold? Why limit your own earning potential? My guess is that to these guys any gold is good. They probably also farm and prospect their own ore, and just really don't care about making what the gems are really worth. They probably think, quite wrongly, that farming it makes it free, so they can price it at whatever they want with no repercussions. Or maybe, and this is the strangest of all, they're just not as greedy as I am.

And there you have it. My little rant and theory on why the gem market is so messed up right now. Unfortunately, while I can complain about it, I'm not sure what to do about it. Gaining absolute control could work, but I fear that more will be posted than one can reasonably hope to flip for profit. Maybe we just have to take it as it is, and do what we can. And meanwhile make gold hand-over-fist through the shuffle :)

4 comments:

  1. Yup, it's pretty much the same on my server & it's hitting the glyph market in a similar way - one or two regular sellers pricing at over 100g per glyph, next seller comes in at 20g & suddenly there are 20 at less than 10g. I think I've sold 3 or 4 glyphs all week but luckily I'm not a big glyph production house so although it's a lost market for me at the moment, I don't have a bank full of stock to sell.

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  2. It is also happening on my server and it is affecting almost everything Cata related: gems, glyphs, epic crafted items....It's sad. In the past if I saw items posted for significantly below their crafted item value, I would do just as mentioned above and buy them and relist for their appropriate value trying to equalize the market. But so far this experience is just not working in Cata. So I am mainly focusing on only crafting items that are selling for above crafed value and on raw materials.
    For example, instead of trying to sell a pair of Emberfire Gloves which require 10 bolts of Embersilk Cloth, 4 Volatile Air, & 4 Volatile Fire to craft (est. crafting cost 500g)for 100g or even less, (and even at that low price have it sit on the AH for several days) I have been selling the cloth or bolts of cloth instead. Although the selling price of the cloth has dropped considerably over the last couple of weeks, it is still a consistent seller. I have even stopped crafting the 4 epic i359 items due to the drop in prices, as the 2 belts are selling for around 4k (estimated crafting cost
    = 4500 - 6000g)and the pants have dropped to 6-8k. So I agree, "What are people thinking?" I remember paying 5k for epic i264 WoLK items. Hopefully, the economy will level out soon, but I personally won't be buying up much of anything anytime soon.

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  3. I almost wonder if it would be worth exploring Blizz implementing a minimun sell price for the AH based on epected value. Im sure the developers have some idea as to how much an item will be worth...

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  4. This post made me cringe, not that I don't like it (in fact just the opposite), but because the gem market on my server is undergoing the same phenomenon.

    Some potential reasons:

    1)There were little (none?) "leveling" gear from 81-85 in Cata that had gem sockets. I don't recall a single piece of quest reward or non-heroic dungeon drop that had a gem socket. Poor planning on Blizz's part IMHO and not sure how this happened; I still vividly remember the green quality quest rewards from Zangarmarsh that had 2-3 sockets!

    Blizz is mediating this by adding socket(s) to crafted BOEs, but IMHO this is too little and way too late. My only hope is that the new metas and meta requirements will help normalize the market.

    2)JC was THE gold-making profession back in Wrath, and now everyone and their DK alt are doing it. Ores were aplenty (so plenty that Blizz nerfed the nodes), and leveling JCers had no way to get rid of the excess gems, cut or uncut.

    As an aspiring AH goblin, I find this frustrating but forces me to think more creatively at the same time. I have dialed back my AH activities to be more conservative and turned my focus to leveling alt/professions for the time being.

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