The best resource available is the Complete Cost Reduction Handbook, which can get your crafting gp costs under 5% of the market price, and also covers how to reduce crafting times and XP costs. The best methods are Extraordinary Artisan and Bind Elemental from Eberron Campaign Setting (Exceptional and Legendary Artisan cover time and XP, respectively). Magical Artisan from Player’s Guide to Faerûn is also a great addition, assuming you can mix Eberron and Forgotten Realms material – it reduces all of the above, though less than the individual Eberron feats do. Several guilds from Dungeon Master’s Guide II also can help.
The fabricate spell can speed up mundane crafting immensely. A dedicated wright (Eberron Campaign Setting) doesn’t actually make things faster, but it can craft for you while you’re off adventuring; this is a highly-recommended use of your Craft Homunculus ability. Unseen crafter from Races of Eberron can provide a similar function.
Avoiding the need to find the materials for sale is possible with true creation, but that is quite high-level.
This is extremely powerful, and will break most games, particularly in a campaign where 3.5’s systemic imbalances are exacerbated by less-than-usual wealth. An artificer could easily dominate such a campaign as it is; really pushing for reductions will dramatically increase the likelihood that you’ll become literally one of the dominant forces in the campaign world, long before your non-magical teammates could manage any such thing.
Unless Warcraft changed something, mundane crafting does not cost XP
Mundane crafting requires Craft skill checks, but no Item Creation feats, and the costs are only time and money, not XP. Specifically, they cost a mere ⅓ of the base price of the item, but crafting takes a number of weeks equal to
(P×10)/(DC×check)
where P is the item's usual price in gold pieces, DC is the Craft DC, and check is the crafter's Craft check result. This formula results in phenomenally long times, but at ⅓ the cost there is a lot of savings.
Magic items require XP, but that is easily replaced
In many places, XP costs are replaced with gp costs or vice versa at a 1:5 ratio. Since magic items cost 50% the base cost in raw materials and 4% the base cost in XP, you can apply the same conversion: five times the 4% is 20%, which can be added on to the existing raw material cost to get 70%.
Thus if magic items simply cost 70% of the base price to craft, instead of 50%, but don't require XP, this is consistent with the original system. Taking an Item Creation feat only enables a 30% discount but doesn't leave you behind.
I have played in quite a few games that make this change; it didn't dramatically improve the popularity of Item Creation feats for players, but it does make them much less of a headache for the DM.
If playing with Eberron Campaign Setting (the book, regardless of whether you play in Eberron) in play, the artificer and Artisan feats do require a little more tracking: it is important to remember that 50% of the base price is the original raw material gp cost, while 20% is the "XP" cost. The artificer's Craft Reserve and Retain Essence class features, as well as the Artisan feats, should be applied before adding these together as the 70%. The Craft Reserve should also be multiplied by 5 gp/XP for consistency.
If either is too expensive, these items were not intended for characters of their level
These processes both result in significant discounts. The value of items is used to control the power of items that players have at a particular level, which is part of the system used to try to ensure that enemies the same level as the players are challenging without being impossible. Making items cheaper or giving players more gold may allow them to steamroll opponents; making items more expensive or giving players less gold, or giving them gold but no place to spend it, may leave players without the tools they need to contribute.
In my experience, there are many classes that just barely find the default wealth rules sufficient for their needs – if they spend carefully. Other, more powerful classes are not nearly so needy, and could do with less. As a result, reducing wealth is something I strongly recommend against – it disproportionately hurts the classes that were already weakest.
On the other hand, I tend to find the system has a fair amount of room for extra wealth before players really start to steamroll. Thus, your choice to make it easier to get items is a move in the better direction.
But do be careful; wealth expectations are a rather fundamental design assumption of the game. Great care should be taken when modifying it. I tend to recommend that new DMs stock fairly close to the guidelines. It takes experienced DMsa lot of care to get modifications to wealth to work the way they want.
Best Answer
This is a hack in the crafting rules, not in the fabricate spell.
That said, in the absence of a hard rule I could not find, there are two contradictory implications at various points in the rules:
1) It is at least strongly implied that 3.5e coins are pure metal. The PHB, on p. 112, notes that a gold piece weighs about 1/50 lbs, and also that 1 lb of gold actually costs 50 gp. There is no reason to think that the "1 lb of gold" is intended as an alloy, so the implication is that coins are actually pure gold, as silly as that is. (Gold is soft and not very durable in pure form. At the absolute minimum, the implication is that if one buys "a pound of gold" one gets exactly coin-grade gold alloy, which does not change the argument here.)
The same logic holds for platinum, silver, and copper, which is a little insane, but it's a simplifying assumption for a game and it's what the rules say.
2) Crafting, on the other hand, makes a simplifying assumption in the other direction: That materials account for 1/3 the total value of any object. I.e., a bow costs more than a stick and a string, because it took someone time and skill to put it together, leather saddlebags are worth more than a bloody cow hide because tanning is a filthy disgusting process, etc.
This is just as silly an approximation as the coin ratios above, but it is a game and it is what the rules say.
The implications under these two rules, as regards coins, are mutually contradictory. I see no way they can be reconciled. If you are insisting on a strict RAW answer, then, yes, it seems a mage can arbitrage the system, and with far more profitable platinum, even.
As a GM I would disallow this in a heartbeat. (That said, some people might find it interesting to work through the idea of a king or a wizard pumping money into the economy; but that is the sort of genre control I expect GMs to exercise and simply say, "I'm not dealing with that.")