A dictionary definition of luxury is, "a material object, [or] service, etc., conducive to sumptuous living, usually a delicacy, elegance, or refinement of living rather than a necessity". The key word, especially in the context of luxury watches, is "necessity".
Under that definition, many mechanical watches would now be considered a luxury. This is because the emergence of quartz in the 1970s delivered watches more accurate and eminently more affordable than their mechanical counterparts. However, many still prefer the mechanical watches due to their considerations of form and craftsmanship over base functionality_. _In this regard, the watch has become a status and style symbol, as well as a functional item.
While luxury is subjective, we can set certain parameters that aid us in the categorization of a luxury watch. Although it may not be possible to say what features_ must _be present to denote luxury, it is certainly worthwhile to mention some features that, when present, do just that.
Exceptional quality is one factor that sets luxury watches apart from the rest. This starts with the materials. While materials such as steel do not preclude a watch from being classified as luxury, certain previous metals for a watch case are much more likely to be seen as such. A case made from solid 18 karat gold, for example, is inherently luxurious due to gold's value, prestige, and rarity. Many entry-level mechanical watches are coated with a layer of gold-colored material to evoke the same sense of luxury, but very few are made from genuine precious metals.
Case embellishments too, like diamonds, hand-engraving, or enameling add a level of artisanship that is quite likely to elevate a watch to the stratum of luxury timepieces.
When it comes to the movement of a luxury mechanical watch, one should expect to see a finely-finished engine ticking away inside an equally well-finished case. The level of finish one could expect to find on a movement would elevate if the movement in question has been manufactured "in-house," meaning the brand has complete control over its appearance and format. When the movement has hand-finished elements, it is also more likely to be considered "luxurious".
The dial and handset of modern mechanical watches are both areas ripe for creative expression. The dial is a canvas very often used by the finest craftspeople in the industry to express themselves and their talents. Multiple styles of enameling exist, and each different skill requires years of practicing to refine. Gem- and stone-setting, hand- and traditional machine-engraving, and miniature painting are yet more ways value and luxury can be added to the dial. Hands themselves are very often manually finished by highly-trained specialists, who are also charged with oxidizing the hands by heating them to very specific temperatures so they turn different colors (usually blue).
While many of these aesthetic items help establish a watch as luxurious, some luxury watches rely on advanced technology instead. For instance, avant-garde mechanisms may feature brutal, challenging designs devoid of the elegance one might associate with high society. Brands like Richard Mille, Urwerk, or HYT are most certainly luxury, but feature a new kind of futurism that the industry embracing as it restructure itself for an ever more electronic age.