The skyrocketing price of gold has highlighted its status as a safe haven, hitting another record this week after more than doubling in two years, and shooting well past the historic threshold of $4,000 an ounce to top $4,600 an ounce.
A boon for investors, high gold prices pose a challenge to luxury watchmakers. Brands are steeling themselves for difficult choices as they rush to find solutions.
“Rising gold prices have strongly impacted brands,” said Oliver Müller, founder and CEO of Swiss consultancy LuxeConsult.
Already buffeted by punishing US tariffs, a weaker dollar and lackluster demand for timepieces in key US and Chinese markets, Müller said high gold prices add further strain to labels’ cash flow.
Some big-name brands, including Rolex, Patek Philippe and Omega have raised prices over the past two years as they seek to offset input costs and tariffs unleashed by US President Donald Trump. Industry observers calculate the price of a gold Rolex watch has gone up by almost 20 per cent over the past 12 months.
Most brands have so far swallowed the rising cost of gold.
“You just have to deal with it,” said Breitling CEO Georges Kern.
“It’s like with the tariffs: You cannot transfer the price onto the consumer,” Kern said.
The rising cost of living has prompted many consumers to hold back on luxury purchases, especially high-end watches, which also face competition from connected timepieces like the Apple watch. Price hikes risk further dampening demand, as seen by the struggles of luxury fashion brands to win back even wealthy clients after raising prices during the post-pandemic boom.
Richemont chairman Johann Rupert famously cautions against excessive price hikes and has said the approach is helping the Swiss conglomerate’s Cartier label, which has strongly outpaced rivals in recent quarters.
Breitling’s Kern is bracing for lower margins. “We just make less margin,” he said.
Labels like independent watchmaker H. Moser & Cie. are putting gold purchases on hold. The brand has been drawing down stocks purchased over two years ago.
“I didn’t want to buy gold at the new price and I was feeling it would go down a bit,” said Edouard Meylan, H. Moser & Cie CEO. “I’m still waiting,” he added.
Lower margins for gold watches compared to steel watches limits the leeway for brands, Meylan explained, noting that customers might be willing to pay five times the cost to produce a steel case — much less than a gold case — but five times the higher-priced gold case risks pushing the final price tag beyond reach.
The stamping process for manufacturing watch cases requires brands to purchase as much as seven times the amount of the final product. This adds to up-front costs, cautioned industry consultant Müller.
“To make 50 gold watches that use a total of 2.5 kilograms of material, you need to finance 17.5 kilograms,” Müller explained.
At current prices, a brand making that amount of watches would have to finance 1.2 million Swiss francs ($1.5 million) of working gold inventory, prompting questions about whether it makes sense to carry on with the high end of a collection and risking further strain to cash-flow.
For shoppers, so far soaring gold prices haven’t seemed to sway preferences.
“If people really want a gold watch, they know this is the price,” said Brian Duffy, CEO Watches of Switzerland, of higher price tags. The multi-brand watch retailer, which operates 196 showrooms in the United Kingdom and the United States generates over half of annual sales from Rolex and Patek Philippe.
“The threat from tariffs was greater — gold is an easy one to explain because people see it as further evidence of value appreciation,” said Duffy.
However, not all labels can expect consumers to fully stomach rising gold prices.
“There are very few brands that have that pricing power,” said Kern. “You need brand image to support that price,” he added, predicting fewer brands will produce gold watches in the future.
Meanwhile, Kern is sticking to his goal to bulk up sales of gold watches at Breitling, which he aims to increase from 10 to 15 percent of annual sales.
Not all brands are ready to take the hit to margins.
Some may turn to casting, a process that entails hollowing out components.
“Increasing your manufacturing efficiency by optimising the volumes of the components is one way to bring down the weight and the cost of the component,” said Müller.
But casting remains debated in the industry, raising questions around quality, durability and craftsmanship, all central to purchasing decisions.
“The watch industry has been very sensitive to this issue,” said Müller.
Other methods for lightening the weight of gold in watch products are also being explored, but these can collide with luxury principles, too.
Swiss watch industry supplier Gecoh-Regence recently introduced “l’or allégé,” or “lightened” gold, weighing 60 percent of solid gold and produced through a process using laminated strips of material and laser wielding.
The company touts the technique as meeting requirements for shape and aesthetics “without any alteration in perceived quality.”
Meylan is unconvinced. “You can save a lot of money, but is it luxury?” he asked, noting the technique tends to be used by lower-end brands.
Meylan has instructed his product team to develop watches in high-tech materials like titanium and ceramic, or find something new through innovation.
But there is no substitute for gold when it comes to watches, he conceded.
“Hardcore gold people want their gold watch and you cannot replace that with another material,” said Meylan.
“You might have to go to a different customer,” Meylan added.
Müller is optimistic new materials can spark buyer interest, citing the success of Richard Mille, one of Switzerland’s top 10 brands, with annual sales topping 1.6 billion Swiss francs. The label sells ultra-lightweight watches made of titanium, ceramic and a carbon and gold leaf blend, recalling technologies developed for Formula 1 race cars.
“Some brands can sell non-precious materials for more money than precious ones,” said Müller, citing Mille’s use of “strong narratives” to sell watches with new materials.
Morgan Stanley and LuxeConsult estimate the brand’s watches carry an average retail price of around 270,000 Swiss francs — often without a trace of traditional precious materials or gemstones.
Meylan of H. Moser & Cie continues to wait for lower gold prices before buying more. In the meantime, he said he plans to bring new materials to the annual Watches and Wonders fair in Geneva in April.
The company might return to buying gold in 2027, “if we feel it’s necessary,” he said.
As for the secondhand market for watches, there has been no sign of increased demand or pricing, data from pre-owned watch market data platform WatchCharts showed.
“We haven’t seen any disproportionate uptick for gold watches in the past year,” WatchCharts founder and CEO Charles Tian told The Business of Fashion, noting raw materials costs are not the main consideration for people buying secondhand watches.
“Brand equity, design and craftsmanship are more important,” said Tian.
