Enchantment or advancement.

[William Cloud Hicklin]

Part of it is Tolkien's adoption of the 'air' of Beowulf etc, where old swords, heirloom swords, simply are better. The blade he subdivides Grendel's mother with is an 'ancient work of giants'- just like the Roman ruins that so intimidated the Old English. There was a pervasive sense that there was an earlier age of 'giants in the earth,' when swords were made by Wayland himself, when heroes (like Heracles or Walse) were the sons of gods.

The other side of it was Tolkien's basic premise in his legendarium, based on his pessimistic Catholicism: this is a fallen world; things are always getting worse. History is the "long defeat." The Silmarils will never be recreated, the Dwarves of Erebor can't rival their forbears' mail, no blades like those of Telchar or Gondolin can now be forged. Aragorn may be a hero, but he's no Beren or Hurin.