What were the two prized possessions of Della and Jim?

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In a more conceptual way, Jim and Della's most prized possessions are one another and the love they feel for each other. While love is not a tangible possession, like a watch or one's hair, it is clearly of greater value to the young couple because they are willing to sacrifice their material possessions in order to buy thoughtful gifts for each other; the reason they are so anxious and desirous to buy thoughtful gifts for one another is because of their shared love. Near the end of the story, the narrator says, 

But let me speak a last word to the wise of these days: Of all who give gifts, these two were the most wise. Of all who give and receive gifts, such as they are the most wise. Everywhere they are the wise ones. They are the magi.

Jim and Della are the most wise, even more so than the wise men who attended Christ's birth, because they realize that their own sacrifice—sacrifices they were willing to make out of love—is ultimately more valuable than anything they might own. In this sense, then, you could even argue that the gifts they buy for one another are their most valuable possessions—not because they have are worth a great deal of money, but because they are symbolic of the love Jim and Della share and their willingness to sacrifice for one another.

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Della's prized possession is her long hair. At the time the story was published it was customary for women to let their hair grow extremely long. They would put it up in a bouffant fashion which came to be called the Gibson Girl style due to the popularity of the magazine illustrations of pretty girls by Charles Dana Gibson. Naturally the long hair required a lot of attention, but most girls and women spent their time at home like Della Young in "The Gift of the Magi." She could spend hours washing, drying, and setting her hair.

Jim's prized possession was a pocket watch he had inherited from his father, who had inherited it from his father. The fact that it was a family heirloom added to the watch's intrinsic value for Jim. Men carried their big pocket watches in a vest pocket with a watch chain and fob, attached. The chain stretched across the vest and had a weight at the other end to protect the watch from accidentally being dropped. If a man should happen to drop his watch the chain would keep it from falling more than a foot or two. The weight, or fob, at the other end would keep the chain from slipping out of the other pocket of the vest. All men who wore suits in those days also wore vests.

Since Della's hair and Jim's watch were their only valuable possessions, it was obviously a great sacrifice for both of them to sell them to buy each other Christmas presents.

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