World's gold demand during the first quarter of 2019 stood at 1070.8 tonne, according to WGC's Q1 Gold Demand Trends report.
Interest rates in the US, geopolitical tensions and global COVID-19 pandemic spurred demand for gold, with the gold-backed electronically traded funds (ETFs) attracting huge inflows of 298 tonnes, largely in the US, to push the global holdings in these products to a record high of 3,185 tonnes during the quarter under review.
In the first quarter of 2019 gold-backed ETFs attracted an investment inflow of 42.9 tonnes, it added.
However, consumer-focused sectors of the market weakened sharply with jewellery demand hit hard by the effects of the outbreak. The quarterly demand dropped 39 per cent to a record low of 325.8 tonnes compared to 533.4 tonnes in the same quarter of 2019, led by a 65 per cent drop in China and 41 per cent fall in India.
Meanwhile, the central banks continued to amass gold, although at a slower pace.
Amid heightened volatility and uncertainty, global gold reserves grew by 145 tonnes in the first quarter this year compared to 157 tonnes in the same period of 2019, witnessing a decline of 8 per cent, the WGC report said.
Russia announced it would suspend its long-term buying programme, signalling a slowdown in global net buying for the second quarter and beyond, it added.
The total supply also declined 4 per cent during January-March as coronavirus-led lockdowns disrupted mine production and gold recycling, it said.
Operations were halted at many projects in an attempt to stem the spread of the virus. Recycling grounds were almost at a standstill towards the end of the quarter as consumers were confined to their homes, the report added.
The COVID-19 pandemic has had a significant and unprecedented impact on global gold demand. The modest strength in the first quarter was due to investment demand, fuelled by huge inflows into gold-backed ETFs. However, in contrast, consumer-focused sectors of the market have suffered drastically, Louise Street, Market Intelligence at WGC said.
"Gold demand will continue to feel the effects of COVID-19 for the rest of 2020. In particular, the divergence between investment in gold-backed ETFs and consumers via jewellery will likely continue until there is greater economic and market certainty," she added.