3 Reasons Diablo 3 Gems show us the "Real" value of your Gold

It's been a few weeks since Blizzard gave us Diablo 3 players a chance to sell our piles of virtual dosh for some real world cash.

A lot more cash than what I have managed to earn selling Diablo 3 gold..

I've personally used this to unload 10 million gold for 25 Euro, which I was quite stoked about.
But when I tried repeating this success with another batch of 10 million gold I found that my auction did not sell, even after posting it three times in a row.

Naturally this is a direct consequence of Blizzard's institution of a minimum price on gold.
You are not allowed to sell your gold for any less than 2,5 Euro per million, which effectively prevents the normal mechanisms of supply and demand from working efficiently.

Charts make everything look more professional!

What is happening is that Blizzard has set a minimum price that is apparently higher than what the market is generally willing to pay compared to the massive amount of supply that is being offered at this price.
The result is that sellers throw their piles of gold in an increasingly bulging pile, while the buyers come in once in a while and take a few pieces from the heap.

But if 2,5 Euro per million Diablo 3 gold is not the "real" market value how can we find out what people are actually willing to pay?

This is where the gem market comes into play. Here are the reasons that gems are such a great tool for finding out what the "correct" value of gold is:

Not only a girl's best friend but also very helpful for a Diablo 3 market tracker  

1) Commodities

The thing about gems are that they are a commodity, which means that every radiant star ruby on the auction house is identical to all the other radiant star rubies. You don't have to worry about random stats, which are a staple of all Diablo 3 items.

2) Liquidity

The gem market is also a fairly liquid market, gems are traded all the time and even the most expensive gems, with prices of 18-23 million gold, sell at least a couple every hour.
Liquidity in a market means that the price is constantly adjusting itself to the supply and demand in the market so whatever selling price you're selling can generally be considered a "real" price that you can expect to sell or buy your goods at.

3) Demand driven

Finally the gem market is a market that has little scarcity in supply, because anyone with some gold can start crafting gems. So the prices for gems should be a more transparent view of what the market is willing to pay, rather than representing the rareness of this particular commodity.




Basically this means that you can quite easily buy a gem on the real money auction house and sell it on the gold auction house for the going price fairly quickly or the other way around.

So finding out what the market is willing to pay for gold is as simple as checking out the prices of a radiant star gem on the RMAH and then looking at the price for the same radiant star gem on the GAH.

At the moment this shows an average of around 30 Euro for a radiant star gem, with the gold price coming in around 20 million gold.

So it looks like the market is willing to pay around 1,5 Euro per million gold right now, which is significantly below the 2,5 Euro floor that Blizzard has set.

It will be very interesting to see how this develops in the future. Will the price of gold start rising up towards Blizzard's floor pricing or will we see gold value continue to fall?



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