At first I thought it might be his pipe, but actually I think Sherlock is burning what appears to be incense – look on the small end table in front of him – during the Victorian mind palace scene, before he took his seven percent solution and then encountered Moriarty:
A few minutes later, Moriarty appears and comments on the smell of 221b:
You may be thinking: what an odd comment, one that has no queer coding implications whatsoever!
And you would be wrong.
Burning incense or “perfumed tapers” was highly associated with homosexuality in the 19th century and was popular among those who self-identified as homosexual or were considered to be bohemian (aka–in many cases–gay). According to historian Graham Robb, many men who “scented” their rooms kept that habit rather close to the chest, although references to “two men burning perfumed tapers and keeping the shutters closed” appear in everything from queer-coded literature to Oscar Wilde’s trials. Here the prosecutor Carson asks Wilde about whether the procurer Alfred Taylor’s rooms were scented:
Carson: […] Were they always highly perfumed, these rooms in College Street?
Wilde: […] He was in the habit of burning perfume, as I am in my rooms.
Carson: As you are in your rooms?
Wilde: As I am in mine – a very charming habit it is.
I’ve come across this multiple times during the course of my readings (including Strangers: Homosexual Love in the Nineteenth Century). Burning incense, dressing a certain way, being clean-shaven, wearing a green carnation in your button hole – these were all things that men could choose to do or use to identify themselves as part of the homosexual community in the late 19th century. These men would burn their incense in private, perhaps when they had a guest… or were simply at home with their partners.
It seems Sherlock’s rooms would smell “manly” indeed.