Guild Wars 2

For the most part, GW2’s economy is very balanced. The three keys to the economy are:

Everything can be salvaged.
Legendary Weapons.
Mystic Forge.

The legendary weapons keep everything running. The requirements for them drive money out of the economy and keep trash items circulating. There is a continual cycle of trash items being salvaged, raw materials being bought and then forged into rares & exotics, and then those rares & exotics are being tossed into the Mystic Forge for the chance at a precursor.

Without the goal of obtaining a Legendary, the economy would inflate. At the moment things are either deflating (ectos) or inflating (precursor weapons/gems) or are holding steady.

That’s actually great. Most games trend toward constant inflation since gold is continually added into the system without many hefty gold sinks and without reason to mass destroy trash items.

Ectos are deflating simply due to supply & demand. As more players acquire their exotic gear, less ectos will be bought. The only large ecto-sink is Legendary weapons, and that is determined by the Precursor drop-rate. If more precursors dropped, more ectos would be bought up, causing the price to rise. Right now the 5 ectos required to create exotics is not enough to keep the price steady.

This leads into the precursor discussion…

Legendaries:

The precursors are simply too rare and for unnecessary reasons. The rarity is causing some disturbances in the economy. Making them more common would actually help stabilize pricing of some goods (ectos). Making them more common shouldn’t hurt the current balance of the economy, weapons will still be trashed at the same frequency, and maybe even more frequently, since more players will believe they can acquire the precursor and also more players may try to obtain multiple Legendaries.

There is good argument for keeping them super rare, but I believe it solves nothing and actually will hurt the game. Right now there is still hope of achieving them, but as players fork over more and more cash, I see that hope dwindling to the point players give up trying. If players give up, the precursors on the market will continually inflate and the economy could spiral into constant inflation as the whole demand for mystic forge fodder dwindles. The gold supply will rise and things will continually become more expensive.

Other than the precursor requirement, the Legendaries do require a lot of gold and grind to achieve. Many players consider it to be “easy”. I also claim it isn’t hard. But neither is throwing weapons into the Mystic Forge, that is simply luck. The other stuff is easy since it is concrete steps to complete, all that is required is time.

With every character having many weapons to utilize, and each player having the ability to roll multiple characters easily, I feel like Legendaries should be a possibility for every player if they are willing to devote the time toward it. Not only does this keep a carrot dangling, but it will keep the economy running efficiently. The constant churn of weapons through the Mystic Forge will not end. As it stands, I’m afraid it could taper off any day and the markets will be no place to play anymore.

Continued…………

Gems:

Gems are the one market players can’t control. Anet controls that market. The Gem exchange makes very little sense in the current economy. I’m afraid the gem market would become non-existent eventually if this trend continues.

Gems are inflating for no reason whatsoever. What this does is make gems very appealing to purchase for real-life dollars. The problem is they are so expensive, who is actually purchasing gems with in-game gold? The price of gems SHOULD be spurring increased gem sales with real cash, but if that was the case, the price of gems for gold would decrease (more gems being bought = less demand = lower price). As it stands, the constant inflation leads me to believe that gems ARE NOT being purchased very often.

The other conclusion is that Anet could be manipulating the market. As I first mentioned, we have no control over the gem exchange. Players have no power on the price. The formulas are all hidden. Maybe gems are being purchased, and perhaps there is actually a surplus of them, but it could be possible Anet is not allowing the price to be reduced.

It is very confusing because in this market you would assume gems would not be as high as they are. Currently it costs about 1 gold for 200 gems, or you can sell 200 gems for 73 silver. This is a 25% increase compared to the beginning of October and a 50% increase when compared to early September. You now spend 2x more for gems, but gems will acquire you 2x more gold. That said, there should be a lot of players buying gems and driving the price back down. It seems to not be the case.

If the economy as a whole was continually inflating I could see the trend being believable, but the fact we have a fairly balanced economy makes the Gem market very hard to believe.

Icey.6045:

Gems:

You now spend 2x more for gems, but gems will acquire you 2x more gold. That said, there should be a lot of players buying gems and driving the price back down. It seems to not be the case.

That is because gold farmers are selling it 5:1 cheaper. Even if you wanted gems it would be cheeper to buy bad gold and trade it for gems than to buy actual gems. If Anet wants this store to work and gold farmers to go way they can’t leave the ratio of legit gold and bad gold at a price difference of 5:1 Too many people will not pay 5x as much just to get it from Anet

Lets see, I can sell my 8,000 gems for 29.2 gold roughly… Or you can spend the $100 at a gold seller site and get roughly 120 gold…

The reason gem prices are so high, is because people DON’T WANT TO SELL THEM TO YOU! It’s not worthwhile, not by a long shot. Eliminate the gold sellers and it’s still not worthwhile to sell gems at these rates.

I wouldn’t even begin to consider it at double the current rates.

On the other hand, a higher exchange rate will allow Anet to relax on the gold scarcity a bit… yes, prices in the TP will adjust accordingly but not vendor, repair or travel costs which will become less stressful for the more casual gamer with the added benefit of curving gold seller’s profit as players see their gold accumulate faster and feel less inclined on buying gold illegally.

I, for one, support that the exchange rate of gold for gems goes up, while making some items in the TP cheaper (the BLTC salvage kit comes to mind and other non vanity items) to counter the harshness of the rate. While a more elaborated study is needed, its not hard to conclude that gold scarcity is here, not only to prevent inflation, but to put an incentive on players to acquire gems with $$$ instead of the more hard to come by in game gold.

[As always my post on economy are not a rant/complain/conspiracy theory. I fully support Anet with $$$ in the gem shop and encourage people that like the game, albeit its flaws, to do so too]

Cancer:
On the other hand, a higher exchange rate will allow Anet to relax on the gold scarcity a bit… yes, prices in the TP will adjust accordingly but not vendor, repair or travel costs which will become less stressful for the more casual gamer with the added benefit of curving gold seller’s profit as players see their gold accumulate faster and feel less inclined on buying gold illegally.

This is not true.

If Scarcity is relaxed it means botters will achieve gold faster. It will still be more efficient to buy from botters. So instead of Aero buying 120 gold with $100, maybe it would be 250 gold for $100.. according to Aero the botters are selling 4x cheaper than Anet is. There is nothing Anet can do to curb this other than eliminating the botters and to try to curb their farming (Diminishing Returns etc.)

It is a good point that right now the gem market is being held hostage by the botters. Players have no desire to purchase gems (other than it being a more secure way to obtain gold). There is little reason to buy gems with gold or for real-life cash. The gem market is just all screwed up atm.

I think that the assumption that gems are not being sold for RL money needs to be re-examined.

It should clear from the number of posts by players on the forums who are trying to buy gems and running into payment issues that there is a sizeable population of players who -are- buying them. Those who run into troubles with payment would be a small percentage of the whole.

I doubt ArenaNet will release the numbers as to how many gems are being bought for real money but I would guess that the number is fairly significant.

I suspect that there is an even larger number of people who have or are buying gold from gold sellers as well. The only good way for ArenaNet to compete against the gold sellers is to ban all gold selling accounts and gold purchasing accounts. Or, they could do what CCP does (company behind EVE) which is to take away all bought in-game currency from the player’s account and let them be.

In other words, if someone bought 100gold and used it all up, when ArenaNet figures out that they bought the gold, they would just subtract 100g from the player’s account even if it puts them into negative territory. So, conceivably, someone could wind up with -100g.

Watching the market, it seems that the cost of buying gems with gold has increased 25% just over the last week or so after price increases had seemed fairly marginal in the weeks prior. Since I was just about to pull the trigger on a modest gem purchase (with my meager supply of earned gold) that’s been a bit discouraging.

As for buying gems with $$ (legitimately, I wouldn’t use a gold seller) I don’t mind spending some $$ at the exchange, but $5 for one bag slot or $7.50 for a bank expansion seems a bit steep to me. $10 for a character slot at least matches the DLC price for BL2 and other games, so seems in line with the larger game market.

The irony (using the term loosely) is that if bag slots were $2 each I’d easily spend $10 and buy 5, but priced as they are it leads me to buy 0.

You’re throwing around the words inflation and deflation like they are going out of style and it’s making it very difficult to follow your post. Those words do not mean what you think they mean.

Precursors are indeed expensive. They are also massively underpriced given their actual scarcity, by a factor of at least two and probably more depending on what assumptions I make. They are absolutely the long run limiting reagent for legendaries and their price should reflect that; given what we know about drop rates I would not be surprised to see the going rate on Dawn hit 600-800 gold. Even 1000 isn’t out of the question; it is very difficult to estimate equilibrium prices when it’s so sensitive to the drop rate of a single, rare item.

Now in theory that high price should prop up prices throughout the economy. That doesn’t happen, though, because the numbers are just so high. People generally do not have the giant piles of gold necessary to actually buy and sell precursors at prices that reflect their actual scarcity; and since the profitability of the whole chain depends on the ability to sell the legendaries at those prices, the whole chain is a giant money pit without it.

The equations governing whether or not we’d expect to see broad-based deflation from this surge in demand for money are not entirely straightforward; things are complicated when your entire system is liquidity constrained and free market equilibria don’t necessarily shift to hold in expected ways.

Short version: the game economy does not have enough gold to support the price structure for legendary precursors, and is struggling to build up that base in the face of very effective sinks. The only way that can hapkitten from a huge drop in overall velocity. Expect price drops on very liquid items to continue.

The driver of the gems to gold exchange rate is a bit subtle because it’s asymmetric. People providing the gems really have dollars or euros or whatever and want to exchange those for gold, but people providing gold aren’t getting dollars in return but gems. The willingness of people to take the gold side, then, depends on the desirability of items offered for purchase in the gem store. So really it’s an equilibrium of people wanting to buy gold with dollars and people wanting to buy character slots with gold, for example.

The price of gems is naturally going to rise as gold becomes more common and thus less valuable; this will happen as more people hit 80. So the market is moving in the way you’d expect. The price of gold on the gem store will always be higher than from a 3rd party, both due to trust issues and from the sellers receiving an inferior currency; still, there’s quite a bit of room for the price of gems in gold to rise before we hit that equilibrium.

So I disagree with your premise on gems being too expensive; they are in fact still very cheap compared to their long run price.

I know the definition of inflation and deflation. Your snide remark made me think you would actually correct me, but you avoided it altogether. Anyway, what you mention regarding legendaries and the economy I do agree with, other than the gem market. I believe gems are too expensive. Dollar —> Gems is not the problem. Gold —> Gems is where the problem lies. Gems are not worth buying with gold.

The fact that the gems are actually going up in price vs gold contradicts you, Icey. Based on how the Gold/Gem exchange works, they wouldn’t be going up if people weren’t buying them with in-game gold.

I, for one, have probably traded around 50g for gems, which I’ve mostly used to buy character slot expansions, extra bank tabs, and extra bag slots.

Mystic Forge Stones and Black Lion Salvage kits also have in-game uses that are still easily worth the gold cost at current conversion rates.

Gems for in game gold has done nothing but go down. I have tracked it since the servers went live In just the last week the exchange rates have been….

Actually I will go back to 10-1….

10-1 1G= 262 gems
10-2 1G= 256 gems
10-3 1G= 254 gems
10-4 1G=232 gems
10-5 1G= 232 gems
10-6 1G= 227 gems
10-7 1G= 225 gems
10-8 1G= 221 gems
10-9 1G= 195 gems
10-10 1G= 190 gems

so since the beginning of this month the exchange has lost 26% in value. In just the past 5 days it has lost 18%. It will probably be less in a couple hours when I check.

Bots and gold sellers are wining, end of story. There isnt anyway you can slice it. Claiming that people would love to buy gems from Anet but can’t, is a HUGE stretch.

The market was set by Anet at 275 gems for 1G, that was the initial exchange rate for in game gold to gems. So since the game has been live we have seen a spiked increase of 50% when for a few hours you could get 415 gems for 1G, to know a complete free fall and a 30% decrease from the original offering.

Now some will say it could go to as low as 137 (50% decrease) and still be viable since it did rise 50%. But that wouldnt be quite valid.

Icey.6045:

I know the definition of inflation and deflation. Your snide remark made me think you would actually correct me, but you avoided it altogether.

Inflation and deflation are terms that describe the rate of change of the aggregate price level of a currency area. In effect, they are statements about the rate of change in the price of your medium of exchange.

They are, specifically, not statements about changes in the price of a particular good.

This is not a particular jab at you, as much as a general frustration at those words being thrown around like they are going out of style. Individual items do not inflate or deflate. Exchange rates do not inflate or deflate. Aggregate price levels do.

Rodarin.6058:

Now some will say it could go to as low as 137 (50% decrease) and still be viable since it did rise 50%. But that wouldnt be quite valid.

I don’t know of anything putting a hard limit on the exchange rate between gold and gems. I know that personally I’ll still be buying gems down to 50 gems per gold or thereabouts, depending on how the prices in game move; it could go even lower with sufficiently attractive items in the gem store.

Inflate, Deflate, Inflation and Deflation. All have differing meanings. After reviewing my original post, I see nowhere that any word is used incorrectly.

Inflation and Deflation are as you describe and when I use those words it was when talking about the overall game economy.

Inflate and Deflate can be used for a single good or service.

lackofcheese: You’re right in theory, but miss what I was saying completely. To simplify:

*Gold is not in a surplus.
*Gems are constantly rising in gold value.
*The value of gems is constant, due to the fixed price based on USD/Euro. Gems should be obtained just as frequently now as when the game first released. Nothing changed that should prevent this. In fact, with Gems able to be traded for more gold, the demand to buy gems with USD/Euro should go up, which would keep the rate balanced. However, the botters may be having a large affect on this, but botters have been around since day 1.

Anyway, it is suspicious to me to see the rate constantly rise and not have any deviations.

ANET has to do something about the gem price sooner better than later. I think that cutting it in 2 would be a nice start. Why?
It’s quite simple. The gem system has been introduced in the game with the aim to give people a fair and secure channel for gold purchasing with real money. This would (or would have) avoid the massive black market of gold.

Sites selling gold earn it with bots and account theft, both mechanics that ruins the game.

Actually they sell gold for 1/3 the price ANET sells it, so why should people buy from gems while they can have 3 times (or sometimes much more) the gold they have from anet for the same amount of money?

I’m a casual gems buyer (well, i was before the price had gone crazy), i find gems are (where) an amazing add to the game, often offering a shortcut to boring tasks (like crafting boosters) or some really fun stuff (dye pack <3, mins..). Needless to say that now i’m sticking to the game avoiding gems due to their price.

Very soon gems sales will stop if the price remains the same, it would simply be replaced by purchasing on “black market” sites. Which are imo not secure, not worthy spending money, not trustworthy and so on, but if the price keeps going up, i’m afraid too many people will take their chances with this sites.
Which will mean more incomes for them, which will lead to more account thefts, more bots and so on. I’m sure ANET does not want this.

Icey.6045:

lackofcheese: You’re right in theory, but miss what I was saying completely. To simplify:

*Gold is not in a surplus.
*Gems are constantly rising in gold value.
*The value of gems is constant, due to the fixed price based on USD/Euro. Gems should be obtained just as frequently now as when the game first released. Nothing changed that should prevent this. In fact, with Gems able to be traded for more gold, the demand to buy gems with USD/Euro should go up, which would keep the rate balanced. However, the botters may be having a large affect on this, but botters have been around since day 1.

I didn’t miss what you were saying; it’s just that what you were saying was wrong.

I don’t find it at all surprising that the price would continue to increase for now, because at the moment quite a few players are still exchanging gold for gems. At current prices, it is still the case that there is on the whole more desire to change gold into gems than vice versa.

I don’t see your cause for concern, since the gold/gem exchange will continue to rise until an approximate equilibrium is reached

Anyway, it is suspicious to me to see the rate constantly rise and not have any deviations.

There is actually quite a bit of variation:
http://www.gw2spidy.com/gem

Intraday has variations cause of the active population. You can easily see the price is higher when the primetime is on and it is cheaper when everyone sleeps. Daily average has no variation, which imo is more important.

Without having volume data everything is speculative. I do not claim to be 100% correct in everything. It is merely my opinions. To claim I’m wrong is quite kitteny of yourself. You say “because at the moment quite a few players are still exchanging gold for gems.” Quite a few players are also exchanging gems for gold, which should make gems cheaper. In fact I would argue more players are buying gems to convert them to gold, regardless of the black market my opinion is more players prefer the safer choice here.

So your claim is more players are purchasing gems with gold.
I claim more players are purchasing gold with gems.

Without volume data neither of us can be right or wrong, we can only speculate.

You implied little to no players were spending gold on gems when you said that “The problem is they are so expensive, who is actually purchasing gems with in-game gold?”

However, plenty of players have been buying the types of items and upgrades I mentioned – BLSKs, Mystic Forge Stones, and slot/bank/character expansions, and many of them have been doing that by converting gold into gems. It’s easy to see evidence of this when you see just how many people think that you should use BLSKs every time you salvage for ectos, as well as the players who recommend to use Mystic Salvage Kits.

Another important point is that, with the current exchange rate in mind, bag slots are a much more efficient way to get extra inventory space than upgrading to large (15+ slot bags), which provides a rather strong incentive to convert some gold to gems for a bag slot instead of using that gold to buy bags.

Those types of reasons mean that, despite your suggestion that the trade was almost nonexistent, the gem/gold trade is alive and well, at least in one direction. However, I do agree with you that there is significant trading going on in the other direction as well, and I’d say that because the exchange rate has only been moving up rather slowly, this would indicate that the gap between demand and supply probably is not very large.

Given that ArenaNet has said in developer interviews that the exchange rate for gems relative to gold is controlled by a supply/demand mechanism, I see very little reason to doubt that the price is going up due to demand for gems exceeding the supply.

You, on the other hand, haven’t given anyone any reason to believe that supply of gems is exceeding demand. What are you basing that conclusion on?

Gems are only created via purchase with USD/Euro.

When you buy gems with gold, have you ever experienced a delay or has the transaction always been near instant?

Unless there are more buy orders than there is supply, which I assume there isn’t if every transaction is near instant, then why is the price constantly rising? The Gem supply has to exceed the demand unless there are reports of transactions having a delay in processing

All the items you mention are purchased with gems. There are 2 ways to obtain gems. You imply people prefer to buy the gems with gold as opposed to with money. I definitely do prefer buying gems with gold, too, but not at these rates. There is a greater supply of USD/Euros than there is gold and you hear about very very large gem purchases all the time.

It is just my gut feeling that the price is artificially rising at a rather quick pace. It is not slow by any means. 25% in 1 month is very very fast. 1 gold for 200 gems is insane when you consider the items on the gem market that are purchased with those 200 gems (1 gold).

While the items are nice, the primary function of the gem market is for players to buy gold with real money. I would argue more players are doing that then buying gem market items. And if that’s the case, gems should not be rising like they are.

Your concerns are mainly for yourself and others who want to purchase gem items without making an monetary contribution. Guess what, gems are always the same price for me though, 800 for $10.

Icey, you’re leaving one significant element from your pricing perspective: Total amount of gold in the system.

A month ago, if I had 2g I was comparatively rich.
Today, if I have 2g then I am well within line with everyone else. I may even be considered poor.

Given that, it only makes sense that people would be willing to spend more gold for gems than before. After all, they have more gold available to use.

I’ve actually only ever purchased gems with $. Thanks for your assumptions, though. The overall market does concern me, however.

Reading through all of the discussion I saw that there was one thing that everyone was missing that I believe caused the gem market to rise this month. GW1 players know that there is a holiday event at the end of the month so it was a good investment to convert gold to gems anticipating that there would be costumes usually 2 for this event and then 2 for wintersday (unconfirmed event). Using this I believe that for 3 months of the year there would be high gem prices coinciding with these events and after these events the prices should drop. So is the gem market inflated? I don’t believe so. If there are no costumes those gems can be used on BLSK or mystic forge stones, storage slots and other items that are used. So I see the current spike in gems as holiday related.

Disclaimer: costumes have not been confirmed by any member of ANET that I know of.

For legendary precursors

Yes they are hard to get but they are not impossible to the point that people will give up on them. Are some of the prices too high on the trading post, yes, but that is also expected as a small group of players have enough wealth to put thousands of rares into the forge and get them. As more of the population is able to do this the price will come down. I also remember reading that ANET is watching the price on the trading post and I assume that if the precusrors for some legendary weapons get towards 600-1000g they will adjust the drops.

I also don’t believe that increasing the drop rate so more people craft legendaries will stabilize some other items but will make them increase in price. The reason for items such as ectos dropping was that those items were over priced to begin with as a smaller percentage of the player base was in high level areas. Now that more people are in those areas getting more rare drops which some are not cost effective to sell on the market they salvage them increaseing the supply of ecto.

On another note the mystic forge is not the sole way to get precursor weapons, they also drop from large chests. (example Claw of Jormag and temples in Orr)

There is so much more gold in the economy now then when the gems were 1g for 300.
Dusk used to cost 90g, it now costs 400g. Do you think some guy who spends $50 on 4k gems at level 80 will sell you 4k gems for 12g? no! 16g is nothing. The low level players who are still leveling are the ones still selling the gems as 16g before level 80 is a good amount of gold to help level, and they are thinning as more and more ppl hit level cap and 16g at level cap is nothing.
The HUGE downside is currently black lion kits cost 5.7s per use, soon it’ll cost 10s per use and ppl will not use them much. They need to lower some of the gem prices. Oh btw entering competitive pvp will cost you about 3-4g per tourny. I’m sure the pvp players will be thrilled.

Icey’s response to my post did make me give more though to the gold seller variable.

I still think that a harsher gold to gem rate would be better overall, (not perfect… as economic solutions that benefits all are very difficult to come by), but the benefits outweigh the costs IMO.

Icey is, of course right, that gold sellers would get gold faster and still be able to sell it cheaper than the legal way, IF it is not done right. There are 2 ways to do it:
1. Inject more gold (drops, rewards, etc)
2. Decrease the cost of some gold sinks

In this case to curve gold sellers the obvious choice would be to reduce the cost of some gold sinks specifically the ones that botters never use (WP and repairs). Again the effect will be gamers accumulating more gold, and feeling less inclined to buy gold (legal or illegaly) and those that choose to buy gold (ie not pressured due to gold scarcity, but for convenience) will have an attractive legal rate (albeit not as good as gold sellers). Remember as the gold to gems rate goes up so should the gems to gold rate making it more attractive to the consumer.

What is missing here is people motivations. While there will always be people willing to risk a gold seller many will flock to a legal solution as long as that legal solution offers a good value (in this case more gold per gem. This has already been proven by companies like Steam, iTunes, Netflix, etc. Many still pirate music, games and movies yet because their goods offer a good value many consumers choose the legal route.

Of course less sinks, means more gold, more gold means higher inflation (on tp only). Is this bad? not necessarily as long as its controlled, inflation is a natural component of any economy. For example creating more jobs has the exact same effect in RL, more people working = more money circulating = higher inflation, as long as goods that people can buy are enough inflation won’t cause a major disturbance. So as long as we have somewhere to spend that extra gold (account/soul bound optional stuff only, like things for our home instance, again to curve gold sellers) it should not cause a major disturbance either.

Haven’t read all the post after Icey’s response to mine but if this turned to debating whether Anet is manipulating the gem/gold market. Well, I, sincerely hope they are doing it and, if they are, I think they are going in the right direction.

With a harsher rate and a kind off 2 tier gem shop where some useful items (again BLTC salvage kit or tourney tickets) have a low gem value and cosmetics/conveninece retain their high gem value, the gem shop will serve as both a gold sink (for stuff used commonly) and as an incentive to buy gems for cosmetic upgrades or legal gold.

Icey.6045:

Gems are only created via purchase with USD/Euro.

When you buy gems with gold, have you ever experienced a delay or has the transaction always been near instant?

Unless there are more buy orders than there is supply, which I assume there isn’t if every transaction is near instant, then why is the price constantly rising? The Gem supply has to exceed the demand unless there are reports of transactions having a delay in processing.

Your reasons for thinking this are understandable, but some of your assumptions are wrong.

The reason there isn’t such a delay is that ArenaNet functions as a market maker, and moreover they have an effectively infinite stock of both gems and gold, so transactions will always be instant. Delayed transactions would be undesirable and unnecessary, so I think the way ArenaNet has made the gold/gem exchange work is quite a good idea.

When you buy or sell gems, you’re not trading directly with other players, you’re trading with ArenaNet. Whenever someone buys gems with gold, ArenaNet creates gems and destroys gold. Similarly, when someone buys gold with gems, ArenaNet destroys gems and creates gold.

However, ArenaNet manages the price based on supply and demand. Basically, the idea is that the price will automatically adjust until the rate at which the gem/gold exchange is creating/destroying gems and gold is equal.

The fact that the price is rising now means that the exchange currently still requires more gems to be created than destroyed.

You’re very wrong.

Players determine the stock of gems. Gems only exist if they’ve been purchased with real-life dollars. A.Net is not making up new stock just to satisfy the gold to gem buyers.

lackofcheese nailed how the exchange works on the head; re-read that if you don’t understand it until you do. I could not have put it any better myself.

The difference in price between gems to gold conversions and 3rd party gold sellers are driven by the 15% exchange fee, the 3rd party risk premium, the time value of money and operating costs of gold sellers, and inferior currency effects.

We know from Diablo 3 that the product of the first 3 terms comes out to roughly 100% – meaning that the price paid by players on a legitimized exchange for gold is roughly twice what they’d pay on a 3rd party site, which already includes the operating costs of the gold sites and the taxes paid by exchange gold sellers.

The rest of the exchange rate gap is likely due to the inferior currency effect of gold sellers being paid in gems instead of dollars, which shifts the curve towards more gems per dollar and a lower volume on gem sales. The size of the gap is going to track closely with how overpriced the market thinks gem store purchases are on the whole.

The Gem market functions the same exact way as the Trading post except players can’t see volume and do not set the prices. Unless something has changed, it is against their original design principles to create gems from thin air to magically satisfy the buy orders.

http://www.arena.net/blog/mike-obrien-on-microtransactions-in-guild-wars-2#more-7677

“We also like the tradability of gems and gold because it makes the rest of the game’s economy more compelling. We’ll have a player-to-player Trading Post in the game—it’s like an auction house but better—which we’ll discuss in an upcoming blog post. Because gems can be traded for gold and vice versa, we don’t need two different trading systems”

Due to millions of players playing the game and the thousands of transactions occuring every second, it is unlikely to ever experience a delay in the currency exchange, I was simply making assumptions that the Gem supply is greater (or very close to equal) to the demand, simply because the exchanges happen very quickly right now.

As the demand grows or weakens, we could theoretically expect buy and sell orders to take more time to process.

My original point somewhere in this thread was that as Gems become worth more in gold then the appeal to buy them with real currency becomes greater, which means the gem supply becomes greater, which means the value of the gem should lessen. Currently gems continue to become more valuable. This simply seems wrong.

And since you brought 3rd party RMT into this, I’ve also been speculating that the farmers may be exploiting the gem market for profit as well, in fact I’d expect them to be doing this. They could be purchasing mass orders of gems with gold, continually driving up the price, and selling those gems for a hefty profity. After the 15% cut A.Net takes, the farmers would have gained at least 10% on their investment in just the past month.

For someone who never buys gems with gold and always uses cash, I’m quite surprised by your concern for this. The gem market has no immediate affect or bearing on the TP. It’s rather moot to sit here and speculate when you (as you say you do) have cash to purchase gems and contribute to the future development and longevity of the game.

The only thing criminal about the gem market is the fact that I can’t make a decent profit selling gems I purchase with my own hard earned money. In order for that to happen I’m going to need gold to gem prices to triple their current rates.

As far as people hording gems for profit, that’s a completely asinine and idea. http://www.gw2spidy.com/gem

• It would take weeks to see any RoI
• You would need massive quantities to make the profit worthwhile
• Having large quantities of gold tied up for weeks on end would counter the profitability since it’d be more effective in other lucrative investments.
• At any point in time players such as myself could buy massive quantities of gems with cash to dump in the market and kill of any profit potential you may think you’re getting.

Stop pretending that you buy all your gems with cash. Just another freeloader butt hurt over gem prices.

Aero.4829:

For someone who never buys gems with gold and always uses cash, I’m quite surprised by your concern for this. The gem market has no immediate affect or bearing on the TP. It’s rather moot to sit here and speculate when you (as you say you do) have cash to purchase gems and contribute to the future development and longevity of the game.

The only thing criminal about the gem market is the fact that I can’t make a decent profit selling gems I purchase with my own hard earned money. In order for that to happen I’m going to need gold to gem prices to triple their current rates.

As far as people hording gems for profit, that’s a completely asinine and idea. http://www.gw2spidy.com/gem

• It would take weeks to see any RoI
• You would need massive quantities to make the profit worthwhile
• Having large quantities of gold tied up for weeks on end would counter the profitability since it’d be more effective in other lucrative investments.
• At any point in time players such as myself could buy massive quantities of gems with cash to dump in the market and kill of any profit potential you may think you’re getting.

Stop pretending that you buy all your gems with cash. Just another freeloader butt hurt over gem prices.

Wow, just wow.

• In my OP I mentioned the gem market last and in a 2nd post, it is hardly my primary concern but it is the thing everyone wanted to talk about it, so I engaged in the conversation. I am no economic major but I enjoy dabbling with markets (RL and IG). I like to learn where I can, even if some people are more abrasive with their lessons then i’d prefer. I can admit being wrong and am open to other’s ideas but I take offense when someone claims to “know-it-all”. None of us know with 100% certainty anything going on behind the scenes. It is speculative at best.

• Hoarding gems for profit is not feasible for a typical player, it is very feasible for 3rd party sellers that are sitting on 1000s of gold. Making 10% in a month on large investments is very worth it. Currently if you purchased gems with gold Oct. 5th, you would be breaking even on the conversion today (7 days later). Assuming the trend continues, it should be profit taking time in the next couple weeks. If the gem value drops in the coming weeks this could be a likely reason. Again, it’s all speculation of course.

• Why call me a liar? I spent $40 on gems.. bought a bank slot and some consumables (dye pack, bl keys)… then at level 60 my account was hacked. It took 3 days for Anet to get it back to me. In that time the hackers emptied my gem account, but there was about 5 gold in my account from the gems and their farming efforts. I wanted to buy the gems back with the gold but the conversions didn’t make sense to do so (considering it was a measly amount of gold). In that time the value of gems has consistently risen and now that I have more gold to my name, I hesitate to buy them. So while I spent $40 in gems, I only got to realize some of that on the gem market. Thanks for calling me a liar though. Shows your true character.

My original point somewhere in this thread was that as (1) Gems become worth more in gold then the appeal to buy them with real currency becomes greater, (2) which means the gem supply becomes greater, which means (3) the value of the gem should lessen. (4) Currently gems continue to become more valuable. This simply seems wrong.

All of your assertions (which I labeled for clarity) are correct. I think the stumbling block is that the feedback effect of (3) – the value of gems lessening as people adjust to an increase in value – is smaller than the initial price movement in (1). It really doesn’t make any sense for people to buy so many gems in response to a price drop that it ultimately raises prices – as people buy gems in response to the price drop, the price drop erodes away, which eliminates the driving force for buying the extra gems in the first place!

And since you brought 3rd party RMT into this, I’ve also been speculating that the farmers may be exploiting the gem market for profit as well, in fact I’d expect them to be doing this. They could be purchasing mass orders of gems with gold, continually driving up the price, and selling those gems for a hefty profity. After the 15% cut A.Net takes, the farmers would have gained at least 10% on their investment in just the past month.

They would have gained a 10% return on their investment, measured in gold, in the past month. Measured in dollars, they would have lost an enormous amount of money.

Also, a 10% monthly return on investment in the game economy right now is completely terrible; a 10% return is what you want to get in a day, not a month.