Global demand for gold remained exceptionally strong in the first quarter of 2026, with investors continuing to increase their exposure to physical gold despite record high prices.
According to the latest Gold Demand Trends report, total gold demand including over the counter trading reached 1,231 tonnes in Q1 2026, representing a 2% increase compared with the same period last year. While the growth in physical volume was modest, the dramatic rise in the gold price pushed the total value of quarterly demand to a record US$193 billion, a 74% increase year on year.
The strongest driver of demand was physical investment through gold bars and coins. Global bar and coin demand surged to 474 tonnes, a 42% increase year on year, making it the second highest quarter on record.
Asian investors were at the forefront of this buying wave, increasing their allocation to physical gold products as investors sought protection from economic uncertainty, inflation risks and geopolitical instability.
Physical Gold Remains the Preferred Investment
The latest figures highlight a major shift in the gold market. Investment demand is increasingly outweighing traditional jewellery consumption as investors view gold less as a luxury product and more as a financial asset.
Gold backed exchange traded funds continued to attract inflows during Q1, adding 62 tonnes of gold. However, this was significantly lower than the exceptional first quarter of 2025, when ETFs added 230 tonnes, partly due to sizeable outflows from US based funds during March.
The trend shows that while institutional investment remains important, many investors are turning towards direct ownership of physical gold through bars and coins.
Record Prices Impact Jewellery Demand
With gold prices reaching unprecedented levels, jewellery demand continued to face pressure. Jewellery consumption volumes declined 23% year on year to 299.7 tonnes as higher prices affected affordability.
However, spending on gold jewellery increased by 31%, demonstrating that consumer confidence in gold jewellery remains positive despite record pricing.
This reflects a changing market where consumers may be buying fewer pieces but are still willing to spend more on higher value gold items.
Central Banks Continue Gold Accumulation
Central banks remained major buyers of gold during the quarter, adding 244 tonnes to their reserves, an increase of 3% compared with Q1 2025.
Although there was a visible increase in selling activity during the quarter, central banks continue to maintain a strong appetite for gold as they diversify reserves and reduce dependence on traditional currencies.
Technology Demand Benefits From AI Growth
Gold demand from technology applications increased slightly, reaching 81.6 tonnes, up 1% year on year.
The growth was largely supported by continued expansion in artificial intelligence infrastructure, where gold remains an important component due to its reliability and conductivity in advanced electronics.
Gold Price Reaches Historic Levels
The LBMA gold price recorded a new quarterly average high of US$4,873 per ounce during Q1 2026.
Gold reached a historical peak of US$5,405 per ounce in January before experiencing a correction. Despite the pullback, gold still delivered a 6% quarterly return.
Supply also increased by 2% year on year to 1,231 tonnes, supported by modest growth in mine production and a 5% increase in recycled gold supply.
Geopolitics and Inflation Continue to Support Gold
The outlook for gold remains closely linked to global economic uncertainty, geopolitical risks and inflation concerns.
Investment demand and central bank buying are expected to remain key drivers throughout 2026 as governments, institutions and private investors continue to seek protection through hard assets.
While high prices are likely to keep pressure on jewellery demand, spending levels are expected to remain resilient as gold maintains its position as a trusted store of value.
The first quarter of 2026 reinforces a powerful market message: investors around the world continue to view physical gold as a strategic asset during periods of uncertainty.
Source: Metals Focus, Refinitiv GFMS, ICE Benchmark Administration, World Gold Council
