Global gold demand has fallen 18 per cent in the first three months of 2017 from the highs of a record-breaking quarter in 2016 as US investors abandoned the precious metal after Donald Trump's election win, industry figures showed on Thursday.

The World Gold Council (WGC) said global first quarter demand was down 228.3 tonnes, plunging from 1,262.8 tonnes in the first quarter of 2016 to 1,034.5 tonnes.

According to analysts, cautious US investors, who rushed to Exchange Traded Funds, or ETFs, before the US presidential election, are now shifting their attention to riskier products. This trend has led to a dip in demand for investment funds backed by physical stocks of gold.

The first quarter fall in gold demand follows a 15 per cent annual plunge in global jewellery demand in 2016 to a seven-year low to 2,041.6 tonnes.

Demand in the Middle East - virtually unchanged at 54.6 tonnes - followed a familiar pattern as growth in Iran contrasted with weakness elsewhere.

Gold prices advanced 8.9 per cent in the first quarter from the end of December, as investors snapped up the precious metal amid political discord in the US.

However, total Middle East consumer demand, including bars, coins and jewellery, rose five per cent to 64.5 tonnes, the highest since the third quarter of 2015. Demand across the rest of the region remained weak in the face of low oil prices and subdued tourist numbers, the impact of which was exaggerated by rising gold prices.

The UAE showed the most usage in the first quarter at 17.2 tonnes, albeit down two per cent from a year earlier. In Saudi Arabia, the total dropped 13 per cent to 14.2 tonnes while Egypt's consumption declined 14 per cent to 6.2 tonnes, the WGC said.

Although the UAE has imposed a five per cent import duty, demand in that market was relatively robust as consumers rushed to buy before the full effect of the tax fed through to end-user prices, the WGC said.

Tawhid Abdullah, chairman of the Dubai Gold and Jewellery Group, said despite the downward demand trend predictions by experts, consumer demand for gold jewellery in the UAE has been steadily increasing. Overall the jewellery industry is looking forward to a well-performing year.

"A declining trend in price in December 2016 until the first 10 days of January 2017 led to a steep rise in the jewellery sales which was further intensified due to the enticing jewellery retail campaign for Dubai Shopping Festival. The jewellery sector managed to pull in greater footfall into the jewellery stores during the festival and this translated into incremental business. The industry further leaped into another sale season for Valentine's Day and is now riding the waves of Akshaya Tritiya, which is considered as an auspicious occasion to purchase gold for various Indian communities. Comfortable pricing of gold has also been a major positive factor for incremental business during these sale seasons," said Abdullah.

"Gold and jewellery is a cultural thing for Asians including local Arabs, Arab expats and expats from Indian subcontinent. Hence the demand is consistent in the region," said Abdullah.

Shamlal Ahamed M.P., Managing director for international operations at Malabar Gold & Diamonds, said since gold has always been a preferred form of investment for majority of the people, the demand for the yellow metal will continue because of its appreciation value. "The jewellery sector has been flourishing for the same reason and the growth has been positive in first quarter of 2017," said Ahamed.

"We have witnessed an increase of over 20 per cent sale as compared to first quarter of 2016. During the recent Akshaya Tritiya, the company has marked a record sale across GCC and India. Gold is undeniably an ideal option in terms of savings for people and will always have an untouched status as a perfect source of investment."

Jewellery demand in Iran jumped 27 per cent year-on-year to a four-year high of 12.9 tonnes, helped by an improving economy. The sector was also boosted by investment-driven purchases, due to a lack of supply of gold coins from the central ban, the WGC said.

The WGC said this year's inflows into exchange traded funds are a fraction of last year's inflows, plummeting 68 per cent to 109.1 tonnes - a drop of 233 tonnes compared with a high 342.1 tonnes. Slower central bank demand also contributed to the weakness. Demand firmed slightly in both the jewellery and technology sectors while investment in gold bars and coins grew by nine per cent at 289.8 tonnes.

Retail investment demand is strong too, up nine per cent year-on-year with demand at over $11 billion in first quarter.

In addition, central bank demand fell by 27 per cent to 76.3 tonnes, nearly 28 tonnes less than in the first quarter of 2016.

Alistair Hewitt, the WGC's market intelligence head, attributed gold's year-on-year demand fall largely to last year's exceptionally high tally. "Although we didn't see the record-breaking surges in ETF inflows experienced in the first quarter of 2016, we have seen good inflows nonetheless this quarter, with strong interest from European investors ahead of the Dutch and French elections," he said.

China led the way on the private investment front, with Chinese bar and coin demand surging 30 per cent to 106 tonnes, fuelled by concerns over potential currency weakness and a frothy property market.

"Elsewhere the picture was less rosy; central bank demand was down and jewellery demand is still in the doldrums," Hewitt said.

Demand in India increased by 15 per cent during the quarter to 123.5 tonne, signalling a return of optimism in the industry. However, Indian jewellery demand remains 18 per cent below the country's five-year quarterly average. The total gold demand in India stood at 107.3 tonnes in the January-March of 2016, impacted by jewellers' strike over excise duty introduction.

"Demand in the first quarter was up 15 per cent, though this is against the low base of the first quarter of 2016. It signals both a return of optimism and the resilience of this industry that has been living with some tough challenges since 2013," WGC India managing director Somasundaram P.R. said. He said the rupee appreciation protected Indian households from the hike in dollar prices, giving them an additional reason to meet the gold demand that was created in 2016, following demonetisation and other regulatory measures against unaccounted wealth.

Globally, technology demand rose by three per cent to 78.5 tonnes, driven mainly by demand in the electronics industry, which rose four per cent to 62.1 tonnes of gold. Demand from general industry rose one per cent to 12.1 tonnes, but dentistry demand fell five per cent to 4.3 tonnes.

The total global supply of gold in the three months to March 30 was a 12 per cent-lower 1 032 tonnes, mainly on a 21 per cent recycling fall to 283 tonnes.

Mine production of 764 t in the same period was little changed from 768 t in the corresponding three months of last year.

The United States is still the largest single holder of official gold with 8133 tonnes; Germany is second with 3377 tonnes and the International Monetary Fund third with 2814 tonnes.