A year after gold prices, luxury watch manufacturers have suffered a severe headache from precious metals. If the procurement team had bought gold for about $2,300 per ounce a year ago, it’s now around $3,300, an increase of 40%. The stock market remains unstable, so few analysts are predicting a correction.
Luxury watch companies rely on selling gold watches. According to the Swiss Watch Industry Federation, watches made from precious metals containing materials such as platinum last year are not just worth almost 40% of Swiss watch total exports, but not just 2.7%.
Many brands are passing costs to consumers. Rolex, the Swiss watch industry’s biggest watchmaker, has raised the price of gold watches by 8% earlier this year, following two price increases in 2024. It is expected to increase for the second time next month.
Others shook inventory and pulled hundreds of gold models out of the market. Data collected by Geneva-based marketing agency Digital Luxury Group shows that in the first three weeks of April, the average price of Cartier watches available on the brand’s US website fell 30.4%, following a 63.8% stock cut, followed by the withdrawal of high-priced gold watches.
DLG also observed that President Donald Trump’s tariff announcement in early April became more pronounced, with prices rising as the watches rose by 17.5% above $100,000. The rose gold watch was the sharpest impact, with prices rising 23.5% against a 16.4% stock drop, showing a dramatic change in balance.
A small brand is catching up. “We use the gold we bought last year, but we don’t sort it unless it’s essential,” says Eduard Meylan, CEO of independent Swiss watchmaker H Moser & CIE.
Although the figures do not include watches, the World Gold Council says that demand for gold from the jewelry sector has fallen to 434 tons from 538.5 tons in the first quarter of 2024 at the same time this year. Overall global demand rose 1% year-on-year, with an increase in gold investments of 170%.
“Because we don’t know how to price, and at this point, gold watches take the best risk at the smallest margin, we’re cancelling all the money we don’t need 100%,” says Meylan. “I’m focusing on steel and ceramics.”
For others, the only option is to keep prices up. “We raised prices late last year, but we all have to raise prices again,” says Roman Marietta, chief product officer at Zenith, one of LVMH’s Swiss luxury watchmakers.
For both Moser and Zenith, Gold Watch accounts for about 20% of annual volume, but accounts for 30-35% of sales. “The prices, especially white gold, are too expensive for cereal production products, and now even for limited editions,” Marietta says. “In the end, it’s a retail price that’s not competitive with the major brands that produce volume gold watches.”
At this point, Gold Watches are taking the highest risk with the smallest margin
Edouard Meylan, CEO H Moser & Cie
Lukasorca, a senior analyst at Bernstein, a research firm that covers global luxury goods, hopes that the rise in gold prices will produce clear winners and losers. “The most desirable brand would be able to plow this, for example, Rolex,” he says. “Brands with a low consumer hierarchy need to be adjusted to reduce volume. “Give rights” should be the name of the game, namely cost-reducing and capacity-reducing. ”
Previously, luxury luxury buyers were thought to be less price sensitive than entry-level buyers, but Marietta says there are signs of change. “We thought the higher segments were pristine and the real stubborn collectors who could afford these watches were not price sensitive,” he says. “But we have to rethink and pay attention to price sensitivity.”
Price increases have become more pronounced since the introduction of US tariffs ©Chip Somodevilla/Getty Images
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Marietta says Zenith has turned his attention to models for developing metals such as platinum and tantalum. The main launch of this spring brand was the GFJ Caliber 135, a limited edition 160-piece watch in platinum.
According to Oliver Müller, founder of Swiss Luxury Consultancy Luxe Consultut, the impact on brand costs is even more severe than it first appears as gold viewing cases are machined from gold bars five times the final product. Scrap can retain its value and be recycled, but advance spending is punitive. “Brands need to compensate not only for rising raw material prices, but also for higher financial costs,” he says. “This has a big impact on cash flow.”
As gold prices rise, some retailers say demand for gold watches shows no signs of slowing down. “The demand for valuable metal watches is relatively inflexible in our market,” says Mohamed Sediki, CEO of Ahmed Sediki, the UAE’s largest watch and jewellery retailer. “A client who is an avid collector and enthusiast continues to win gold watches.”
Some manufacturers say they’ll reduce the amount of gold watches, but Sejiki says they hope the brand meets his orders. “We are confident that supply is consistent based on the demand for watches,” he says. “There is a regular influx of watches that are currently being met with regular shipping.”
Analysts suggest that brands need to focus on innovating other or new precious metals. “One solution is to avoid precious metals and focus on other materials,” Muller says. “Richard Mill is the epitome of using plastic for gold’s value. But then you risk losing market share at the high end. This is still the most powerful market segment. Alternatively, for example, pushing out the amount of gold in your watch, for example, components. This will help reduce the burden on cash flow.”
One solution is to avoid precious metals and concentrate on other materials
Oliver Muller, Luxeconstar
Meylan predicts several important material changes. “White gold dies because steel is cheaper and more fashionable, but gold may need to be replaced with materials such as palladium or tantalum,” he says. “In time, gold watches can become as expensive as platinum watches as rarity increases.”
But dealing with alternative metals may not reduce it. “From our experience, clients looking to get a gold watch will always buy gold watches, whether they have a platinum, palladium or tantalum version,” says Seddiqi. “Their decision-making is not usually driven by alternative options.”
Another effect of rising gold prices could be a mid-price spike as buyers aim to use DIP in the market to experience a 12th consecutive quarter decline. But watch founder Charles Tian, a second-hand market tracker and co-author of Morgan Stanley’s Quarterly Market Report, says the secondary market has yet to experience significant changes due to rising gold prices. “The main reason for this is that the gold value of the watch is not large enough compared to the overall market value. Even if gold has risen by 40% over the past year, this is most likely to lead to an increase of less than 10-15% compared to the overall value of the watch.”
He points out that the Gold Watch, in particular the Rolex model, has outperformed the steel model over the past five years, with a median increase of 32.3% compared to 26.4% of steel. Still, he adds cooling in the secondary market over the past three years, meaning the pandemic-induced rush of watch investments that sent priced rockets is not at zero for buyers today’s category.
