Global gold markets delivered a record-breaking start to 2026, as rising prices and heightened geopolitical tensions pushed the total value of demand to an unprecedented $193 billion, even as overall volumes posted only modest growth, according to the World Gold Council (WGC).
Data for the first quarter shows total gold demand, including over-the-counter (OTC) transactions, rose 2 per cent year-on-year to 1,231 tonnes. However, the real story lies in pricing dynamics: a sharp rally in bullion prices drove a 74 per cent jump in the dollar value of demand, underscoring gold’s strengthening role as a financial hedge in an increasingly volatile global environment.
The benchmark LBMA gold price averaged a record $4,873 per ounce during the quarter, after briefly touching an all-time high of $5,405 in January. The metal returned 6 per cent over the period, reinforcing its appeal amid persistent inflation concerns and geopolitical risk, particularly linked to the ongoing US-Israel-Iran conflict.
Investor appetite remained the dominant force in the market, with bar and coin demand climbing 42 per cent year-on-year to 474 tonnes, the second-highest quarterly level on record. Asian investors led the surge, accelerating purchases of physical gold as a store of value.
Gold-backed exchange-traded funds also recorded inflows of 62 tonnes, although this marked a slowdown compared with the exceptionally strong first quarter of 2025, when inflows reached 230 tonnes. Analysts attributed the moderation partly to outflows from US-listed funds toward the end of the quarter.
In contrast, jewellery demand continued to decline in volume terms, falling 23 per cent year-on-year. Elevated prices have dampened consumer purchasing power, particularly in price-sensitive markets.
However, total spending on jewellery still rose by 31 per cent, indicating that underlying sentiment toward gold remains resilient. Consumers appear willing to spend more despite buying less, highlighting gold’s enduring cultural and financial significance.
Official sector demand remained robust, with central banks adding a net 244 tonnes of gold during the quarter, up 3 per cent year-on-year. This sustained accumulation comes despite a noticeable increase in selling activity, suggesting ongoing portfolio diversification and reserve management strategies.
Central bank demand continues to provide a critical floor for the market, particularly as policymakers navigate currency volatility and geopolitical fragmentation.
Gold demand from the technology sector edged up 1 per cent to 82 tonnes, supported largely by expansion in artificial intelligence infrastructure, which continues to drive demand for high-performance electronic components.
On the supply side, total output increased by 2 per cent year-on-year to 1,231 tonnes. The rise was driven by modest gains in mine production alongside a 5 per cent increase in recycled gold supply, reflecting higher prices incentivising secondary market flows.
Looking ahead, geopolitical risk is expected to remain the central driver of gold demand through 2026. Analysts anticipate continued strength in both investment flows and central bank purchases, supported by inflationary pressures and ongoing global instability.
Bar and coin investment is likely to remain particularly strong, while ETF demand may moderate compared with last year’s surge. Meanwhile, jewellery volumes are expected to stay under pressure, although spending levels could remain resilient in the absence of major economic shocks.
Supply growth is projected to remain modest, with higher prices encouraging incremental increases in mine output. However, constraints such as energy shortages, project financing challenges, and limited new discoveries could cap long-term expansion.
Overall, the gold market is entering a phase where macroeconomic and geopolitical forces, not traditional consumption patterns, are increasingly dictating price direction and demand structure, reinforcing its status as a cornerstone asset in times of global uncertainty.
