Many years ago, had the basement panelled out in knotty red cedar tongue/groove planks. Built a custom gun rack with it in the gunroom. Finished all with a urethane coating. Never had a problem with guns rusting in the rack.
Not sure if you mean a 'standup'-type gun rack sitting on the floor, where the guns sit vertically on their butts and lean into barrel slots, or, a wall rack where it's all hanging off the wall? I'd be concerned more about wood strength with the latter type since cedar isn't a very strong wood. I agree with the others though; a sealing finish, at least in the barrel slots. You wouldn't have to seal the whole thing if you wanted to preserve the natural wood look.
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