Why gold in 2026? Australia's macro shifts and the case for gold

Gold’s role in Australian portfolios

Australia’s economy continues to grow but resurgent inflation and the Reserve Bank of Australia (RBA)’s decision to resume tightening in February 2026 – diverging from some of its peers – raises questions around portfolio allocations. Australia's unique geopolitical positioning, with its fortunes tied to increasingly affluent trade partners within the Indo-Pacific while being strategically aligned with the US, has created an asymmetry that makes portfolio diversification crucial.

Against this backdrop, gold’s role in Australian portfolios warrants renewed attention. This report finds that gold has delivered positive returns across all RBA rate regimes since 2010, appreciated notably in AUD terms since 2022, and provides meaningful downside protection during equity stress. For Australian investors, a strategic allocation to gold offers both a macro hedge and a portfolio diversifier at a time when uncertainty takes centre stage.

The 2026 macro picture

Economic resilience and inflation pressure

Australia’s economy has extended its growth streak through 17 consecutive quarters in Q4 2025 with GDP expanding 2.6% y/y. This comes on the back of private investments (Chart 1) – which grew at their strongest pace since Q4 2021, led by growth in dwelling construction and in data centres in New South Wales and Victoria.¹

These challenges have shifted the RBA from a cautious hold to active tightening. Australian CPI rebounded to 3.8% in January 2026, and the RBA raised the cash rate by 25 basis points to 3.85% in February – the first hike since November 2023 (Chart 2). The recent war in the Middle East sparked further inflationary concerns, prompting the RBA to hike rates again in March to 4.1% citing geopolitical risks and the resultant inflationary pressure as key reasons.²

Meanwhile, renewed spikes in geopolitical risk could pose headwinds for the Australian economy, given its heavy reliance on exports. Historical patterns suggest that geopolitical risk shocks tend to cluster, and during most such episodes, both domestic and global equities have come under pressure (Chart 5).

Gold’s strategic place in Australian portfolios

Gold, the asset independent from Australian’s macro drivers

Investors consider opportunity costs when allocating into any asset class, and with the RBA back in tightening mode, a natural question arises: do Australian rate cycles meaningfully impact gold returns? As it turns out, not much.

Gold has historically delivered positive returns across tightening, hold and easing environments, with no clear evidence that rising rates impair gold performance, when priced in AUD. Moreover, gold delivered a higher average 12-month forward return than Australian equities in every RBA regime. The gap is most pronounced during easing cycles, when gold returned 14% - partially fuelled by potential AUD depreciation during such mode – and equities returned around 1% on average (Chart 6).

In fact, the past four years provides a meaningful stress test. RBA started tightening in 2022, making cash deposits attractive after ultra-low rates. Between 2022 and now, gold appreciated by approximately 181%, which more than offset the opportunity cost of holding a non-yielding asset. During this period, fixed income investors saw real returns fall around to 95 cents to the dollar with nominal returns rising by around 2% (Chart 7).

Gold's performance is driven by a diverse set of global factors that operate largely independently of domestic interest rate policy. The question for Australian investors is no longer whether gold belongs in portfolios, but how can it not.

Gold performs well across all interest rate market regimes. Since 2010, gold has delivered positive 12-month forward returns whether the RBA was tightening, holding or easing, with no clear evidence that rising rates impair performance in AUD terms.

The case for diversification has only grown stronger. Geopolitical uncertainty, while episodic, keeps the diversification argument for gold intact as each new shock tests a portfolio’s ability to sustain through the episode.

The opportunity cost argument. This often works against gold, but since 2022, gold appreciated notably in AUD terms while cash deposits yielded around 3% and fixed income instruments saw real returns fall.

In summary, we believe gold’s role as a strategic asset for Australian investors remains highly relevant, more so now than ever.