Gold, typically viewed as a safe-haven asset during times of volatility, experienced a five per cent decline in investment volumes during the first quarter. This downturn occurred despite gold reaching a record high in January, as investors initially sought refuge from a weak dollar and policy uncertainties.

Data from the World Gold Council revealed that significant outflows in March reversed the substantial inflows seen in January and February into gold exchange-traded funds (ETFs). These ETFs offer an accessible way to invest in the precious metal.

“Oftentimes, because gold is so widely accepted, it is the first thing that you sell when you need a certain access to cash or to liquidity,” explained Juan Carlos Artigas, an expert at the World Gold Council.

The conflict in the Middle East, particularly following US-Israeli attacks on Iran at the end of February which led to traffic closures through the Strait of Hormuz, disrupted global markets. This disruption sent oil and gas prices soaring, compelling many investors to liquidate positions to raise necessary cash.

Furthermore, the prospect of interest rate hikes by the US Federal Reserve, in response to rising inflation, strengthened the dollar. This made gold more expensive for investors not holding US dollars, potentially dampening demand.

Despite the drop in investment volume, the value of gold purchases saw a significant increase of 62 per cent. Gold prices reached a new record just shy of $5,600 per ounce at the end of January, with the quarterly average price standing at $4,873 per ounce.

The high prices, largely driven by investment demand, adversely affected the jewellery market. The war also impacted the jewellery sector, given the Middle East's role as a key shipping hub.