Gold, Housing and RBA Rate Cuts

Precious metal markets were back in bull market mode this week, with the USD gold price climbing back toward USD $3,300 per troy ounce (oz).

Rising by just over USD $100oz from last week’s low on May 16^th, the market is showing notable resilience, despite the unwind of speculative positioning, which has almost halved since mid-March, with strong physical demand meeting being seen whenever gold pulls back.

Silver has also put in a solid week, climbing by 3% back toward USD $33oz, with the gold to silver ratio sitting at around 100.

While both metals look like they may remain in consolidation phase for some time, clients at ABC Bullion continue to add to their holdings, with notable demand for Platinum also being seen this week.

The healthy trading volumes we continue to see, and demand for precious metals that is being observed industry wide is only likely to strengthen given developments on the interest rate front, with an incredibly dovish Reserve Bank of Australia (RBA) cutting rates by 0.25% this week.

Gold vs Australian Property in a World of Interest Rate Cuts:

The RBA has cut interest rates twice so far this year, bringing the local cash rate down to just 3.85%. Once factoring in inflation (which was running at 2.4% per annum in the year to March 2025), real rates are closer to just 1.50% today.

Real rates are almost certain to fall toward or even below 1% in the coming months, with markets pricing in a 70% chance that the RBA will cut rates again in June.

Given Australia’s obsession with all things real estate, it's no surprise that there has been a surge of “what do the RBA rate cuts mean for property” related articles and commentary in recent days, with the consensus seeming to be that rate cuts are unquestionably bullish and will kickstart another cycle of above average house price growth.

While there is no doubt lower rates ease the burden for existing mortgage-holders and increase the borrowing capacity for those looking to get onto the housing ladder, there are other factors at play that have supported the housing market.

Those factors include supply side constraints, with Housing Industry Association economist Maurice Tapang noting in February 2025 that building approvals were “nowhere near the levels needed to meet underlying demand”, with record levels of immigration in recent years also playing its part in pushing house prices (and rents) higher.

While all those factors bode well for the housing market, there are warning signs brewing, including the continued slow growth of the economy, flat-lining real wages for the workers taking out mortgages, and more recently, an increase in bad loans and slowing profits in the Australian banking sector.

Go for Gold Instead?

Given this background, while lower rates might be “good for housing”, investors may also do well to look at gold in the current climate, which typically thrives in periods of low and falling real interest rates.

That gold would tend to do well as rates are lowered should be no surprise, as in such environments, investors are more likely to move their money away from cash and term deposits (with the returns on these investments declining) and into assets that offer the prospect of strong capital growth.

Gold has more than delivered in this regard and indeed has been a market leader in these environments, with average returns of close to 20% per annum in years that real interest rates  are 2% or lower, like they are today. This can be seen in the table below, which comes from ABC Bullion’s 2025 Gold Infographic.

Gold vs Housing!

As a final observation, it is worth updating one of our favourite charts, which looks at the price of Australian residential real estate, measured both in dollars, but also in ounces of gold.  

This can be seen below, with the following chart (Figure 1) highlighting Australia’s median house price (grey columns), averaged across all major cities and that same median house price divided by the price of an ounce of gold (housing the gold ratio – gold line).

Figure 1: National Average Median House Price vs Housing to Gold Ratio

Sources: ABS (2025), Abelson, P., & Chung, D. (2005), LBMA (2025)

The chart highlights clearly which asset (gold or housing) is outperforming relative to the other, given both are going up when measured in dollar terms.

The chart also makes clear of a notable structural shift. Gold has significantly outperformed Australian property in recent years with annualised returns of 14.3% and 7.6% respectively in nominal terms from 2020 to 2024.

This is seen in the median house price-to-gold ratio (Figure 1) which has fallen sharply in recent years (indeed it has been in decline from its peak around 2004) and sat at 210 by the end of 2024, well below the long-term average (294).

This decline reflects the sharp rally in the price of gold. In essence, gold has not only preserved but enhanced purchasing power more effectively than property for the last twenty years, with this trend accelerating since the pandemic hit in 2020.

Building Home Deposits Using Gold.

It has been getting harder and harder to save for a home deposit in Australia, with interest rates long lagging behind the growth in Australian house prices.

The recent cut in interest rates with the RBA cutting twice this year (50bp) down to 3.85%, and the prospect of even further cuts to come, while great news for those with a mortgage, only makes it harder for those trying to build a home deposit through a traditional savings account or term deposit.

Saving in gold on the other hand has been far more rewarding, given the growth in the gold price has far outpaced the growth in Australian house prices since the turn of the century.

To help visualise this, gold rose by 746% between 2000 and 2024, while median housing prices rose by 395%.

So, while it took 359 ounces of gold in the year 2000 to buy the median house (or 72 ounces for a 20% deposit), it took just 210 ounces of gold to buy an entire house by the end of 2024, or just 42 ounces for a deposit (Table 1).

The numbers have moved even further in gold’s favour in 2025, given the surge that has seen prices move to all-time highs above AUD $5000 per ounce.

As a result, we may see a continuation of a shift in sentiment particularly among younger Australians who are currently struggling to get into the property market towards alternative stores of value and sources of return like physical gold.

An out performer in low-rate environments, highly liquid, inflation-resistant and historically uncorrelated to risk assets, these younger Australians will join the ranks of millions of global investors who are increasingly using gold not just as a defensive asset, but instead as a strategic savings tool.

Table 1: Chart Summary - Key Dates

Jordan Eliseo
General Manager, ABC Bullion Australia

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