Housing Market Crossroads: Will Lower Mortgage Rates Boost Gold?

The housing market stands at a critical juncture. After years of soaring prices and historically low mortgage rates, the landscape is shifting. As of July 2025, U.S. home prices were up 1.2% year-over-year, with a median price of $443,019, showing the market’s resilience. But with the Federal Reserve signaling potential interest rate cuts on the horizon, a key question arises: Housing Market Crossroads: Will Lower Mortgage Rates Boost Gold? The answer, as with most things in economics, is complex and multifaceted.

The Inverse Relationship: Interest Rates and Gold

Gold and interest rates typically exhibit an inverse relationship. When interest rates are high, investors often favor interest-bearing assets like bonds, as they offer a guaranteed return. However, when interest rates decline, the opportunity cost of holding gold decreases, making it a more attractive investment. As Steven Conners, founder and president of Conners Wealth Management, explains, “As the returns on risk-free assets decline, gold prices [often benefit]”.

From 1966 through 2020, an index of gold prices advanced 8.37% annualized when the Fed was lowering interest rates compared to 5.53% when raising interest rates. This shows that falling rates can be a tailwind for gold prices.

Housing Market Dynamics: The Lock-In Effect

The housing market is currently experiencing a “lock-in effect.” Millions of homeowners secured historically low mortgage rates between 2020 and early 2022. As of September 2025, with rates hovering between 6.33% and 6.72%, many are reluctant to sell, as it would mean giving up their low-interest loans. This reluctance has led to a constriction of housing inventory, preventing significant price declines.

How Lower Mortgage Rates Could Impact Gold

If the Federal Reserve lowers mortgage rates, several scenarios could unfold, influencing the price of gold:

Increased Housing Activity: Lower rates could spur increased home buying and refinancing activity. This could stimulate the economy, potentially leading to inflation. Gold is often seen as an inflation hedge, with investors flocking to it as a store of value when currencies lose purchasing power.
Weakening Dollar: Rate cuts often lead to a weakening U.S. dollar. Since gold is priced in dollars, a weaker dollar makes gold more attractive to international investors, driving up demand and prices.
Safe-Haven Demand: Lower rates could signal economic uncertainty, prompting investors to seek safe-haven assets like gold. Gold has historically been a safe haven during economic turmoil. During major crises such as the 2008 subprime crisis or the COVID-19 pandemic, the price of gold has shown an upward trend.
Shift in Investment Strategies: Lower mortgage rates could lead investors to re-evaluate their portfolios. Some may choose to diversify into gold to balance their real estate holdings, especially if they perceive the housing market as overvalued or vulnerable.

The Counterarguments: Factors That Could Limit Gold’s Rise

While lower mortgage rates could boost gold, several factors could temper its rise:

Geopolitical Stability: Gold often thrives on uncertainty. If geopolitical tensions ease, investors may shift away from safe-haven assets.
Strong Economic Growth: Robust economic growth could lead to higher interest rates, diminishing gold’s appeal.
Alternative Investments: The rise of cryptocurrencies and other alternative investments could divert funds away from gold.

Historical Perspective: Gold vs. Housing

Historically, gold and housing prices have exhibited a complex relationship. They rose together in the mid-2000s because interest rates were low. When the housing bubble burst and cascaded through the financial system, the world fell into economic crisis, which added fuel to the fire under gold. But when the U.S. housing market and the global economy recovered, the gold fell out of favor.

Expert Opinions and Forecasts

Experts have mixed opinions on the future of gold prices. Some analysts predict a significant rise, with Goldman Sachs suggesting gold could reach nearly $5,000 in 2026 under the right conditions. ANZ raises gold forecast to $3800 per ounce, with prices potentially reaching $4,000 by mid-2026. Others are more cautious, citing potential headwinds such as geopolitical stability and rising interest rates.

Strategic Allocation: A Balanced Approach

Given the uncertainties in the market, a strategic allocation to gold is advisable. Many financial advisors suggest allocating 5% to 10% of an investment portfolio to gold as a hedge against economic uncertainty and a diversifier.

The Bottom Line

Housing Market Crossroads: Will Lower Mortgage Rates Boost Gold? Lower mortgage rates could indeed provide a boost to gold prices, driven by increased housing activity, a weakening dollar, and safe-haven demand. However, factors such as geopolitical stability and alternative investments could limit gold’s rise.

Call to Action

Navigating the complexities of the housing and gold markets requires careful analysis and a well-thought-out investment strategy. Contact our firm today for a consultation to discuss your investment goals and how gold can fit into your portfolio.