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O. Henry first establishes the great value of the two most important possessions belonging to Jim and Della Young. Jim's pocket watch may or may not have had much actual monetary value, but it was a family heirloom, having been used by his father and his grandfather before that. Della's hair was beautiful beyond description, more glorious than the "jewels and gifts" belonging to the Queen of Sheba.
Della, however, sacrificed her hair in order to obtain money for Jim's Christmas present. She took this drastic step not because she wanted to buy Jim any present, but because she needed to find something very special to indicate the depth of her love for him - "Something fine and rare and sterling-something just a little bit near to being worthy of the honour of being owned by Jim."
In the same way, Jim sold the watch, deciding that he wanted to demonstrate his love for Della by surprising her with a Christmas gift of "The Combs-the set of combs, side and back, that Della had worshipped for long in a Broadway window.
The story concludes by comparing the valuable material gifts brought by the magi to the baby Jesus - "no doubt wise ones, possibly bearing the privilege of exchange in case of duplication" - with the gifts given by Jim and Della - "who most unwisely sacrificed for each other the greatest treasures of their home." However, O. Henry states that "these two were the wisest" because their gifts were based on deep and abiding true love, not the intellectual wisdom of the wise men.
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