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

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 paper 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.

Gold has historically delivered positive returns across tightening, hold and easing environments, with no clear evidence that rising rates impair its 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 times-and equities returned around 1% on average.

This is mainly because gold is driven by supply and demand dynamics determined globally. For instance, global geopolitical risks, inflation and major central banks' monetary policy paths collectively impact investment demand for gold from investors worldwide-including those from Australia. This underscores gold's role as a global asset that is largely independent of Australia's domestic monetary cycle.

In fact, the past four years provides a meaningful stress test. The 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%.

As correlations between local bonds and equities continue to rise, investors' search for effective diversifiers has intensified. Since 2022, structurally higher global inflation and more frequent geopolitical shocks have driven bond-equity correlations higher, as discussed earlier.

Yet gold has maintained a consistently negative relationship with Australian equities over time, offering investors a reliable source of diversification and portfolio resilience.