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Although Americans continue to deal with high inflation and high interest rates, the upside has been that many investments have been rising too, such as with the S&P 500 and Dow Jones Industrial Average hitting record highs in 2024. But stocks aren’t the only hot investment.
Gold prices, for example, have also recently hit record highs as some investors have turned to precious metals to diversify amidst the current economic conditions. And, other alternatives, including collectibles like luxury watches, can also be appealing to those looking for portfolio diversification, although resale prices of luxury watches have been on a downward trend lately, according to WatchCharts data.
Still, as the saying goes, past performance is not a guarantee of future results. Just going on recent prices alone isn’t necessarily the best way to choose between investing in gold vs. luxury watches.
Find out more about the gold investing options available to you here.
Gold vs. luxury watches: Which is the better investment?
There could be some scenarios where one is a better fit for certain investors, including:
When gold might be the better investment
Some situations where it might make more sense to invest in gold rather than invest in watches include the following:
When you want to hedge against inflation
While your dollar might not go as far as it used to due to inflation, it’s possible that buying gold could provide a better hedge.
“If someone’s worried about ongoing inflation, gold might be a smarter bet than luxury watches. Gold has a long history of holding its value when prices rise, acting like a safe haven,” says Aron Solomon, chief strategy officer at Amplify, and a co-founder of Mission Watch Company.
“Luxury watches are a massive crapshoot as their value can fluctuate based on trends, brand popularity, and collector demand, which might not always keep up with inflation or provide the stability someone might be looking for during uncertain economic times,” he adds.
Explore how gold could add more value to your investing portfolio now.
When you want more liquidity
If you need to sell an asset for cash, gold is often considered more liquid than luxury watches.
“Getting into or out of gold and silver bars and coins is a breeze and easier on the wallet in this climate,” says Alex Ebkarian, COO and co-founder at Allegiance Gold.
In contrast, certain luxury watches don’t have as established or deep trading markets.
“While some of the entry-level stainless steel and sport model Rolexes, Pateks and Audemars pieces may be more liquid at lower prices than in previous cycles, we’re starting to see many of the higher-end models hit the market with a smaller pool of buyers,” says Rob Petrozzo, co-founder at Rally.
When you want simplicity
Buying gold can also be a better choice for investors looking for an alternative investment that typically is widely accessible and one they’re more familiar with.
“For most individuals, investing in gold bullion will be a more straightforward investment. Gold has been a store of value around the world and across different cultures for thousands of years,” says Patrick Yip, senior director of business development at APMEX.
In contrast, successfully investing in luxury watches tends to require far greater expertise in a very niche market, and even that doesn’t make investing easy.
“Even really smart collectors make huge mistakes in buying and selling,” says Solomon.
When luxury watches might be the better investment
Although luxury watches can be more complex and require far greater expertise, there are times when it could make sense to invest in luxury watches over gold. Some examples include:
When you have a passion for watches
Luxury watches can be difficult to turn a profit from, so some people see collecting as more of a hobby with a potential upside.
“If you are interested in collecting and looking for a way to diversify your investment portfolio, then it might make sense to add some watches instead,” says Albert Ganjei, president and owner of European Watch Company.
“The joy of collecting definitely surpasses the joy of making a profit, but it’s important to understand the market dynamics and trends to make informed decisions,” he adds.
When you’re willing to take on a higher risk/reward ratio
Luxury watch values can be highly speculative, which can lead to both higher risk and higher return potential.
“Even in a down market, many of the watches that were highly sought after during the pandemic boom are still providing massive returns for those lucky enough to purchase at MSRP,” says Petrozzo.
“For someone with the relationships, deep pockets, and a slightly more aggressive risk profile, you can own some of these pieces as a wearable investment and see much greater returns than gold has historically provided,” he added.
When you find a good buying opportunity
Because gold is generally more liquid than luxury watches, you’re probably not going to easily find gold bars or gold coins for sale at significantly less than the spot price of gold per ounce.
In contrast, sometimes luxury watches present good buying opportunities precisely because of their more limited liquidity.
“if you know what to buy, can be 100% sure of its authenticity and condition, and the person is in distress and needs to say, sell a $40,000 watch this week and will let it go for $28,000…then you can do better percentage-wise with luxury watches than gold,” says Solomon.
The bottom line
Both gold and luxury watches can be appealing to investors looking for portfolio diversification. However, there are many different motivations for buying gold vs. buying luxury watches, not all of which are strictly about maximizing returns. Consider factors such as your risk tolerance, knowledge and interest in these different assets before investing. You might even find that there’s a place for both in your portfolio.
