Global demand for gold jewellery fell in the first quarter of 2026, tumbling from record highs as the precious metal comes under pressure amid uncertainty caused by the Iran war.
Buyers are more cautious in their spending decisions and channelling funds more into bullion investments, rather than buying more expensive finished gold jewellery. Investors are hedging their bets owing to the conflict that has roiled markets across asset classes. The jewellery market outlook also remains murky, analysts say.
The rebound in the market would depend – much like other asset classes – on how long the conflict will last and when conditions return to normal.
"Geopolitical tensions have had a clear and direct impact. Gold, being a safe-haven asset, saw stronger investment demand during periods of uncertainty, pushing prices higher," Chandu Siroya, vice chairman of Dubai Jewellery Group, told The National. "However, this has created a divergence – investment demand [for bullion] strengthened while jewellery demand softened due to high prices."
Demand slump
Global gold jewellery demand faced its weakest three-month period since the second quarter of 2020, at the height of the Covid-19 pandemic, the World Gold Council (WGC) said in its latest quarterly report. However, despite the demand slump, the value of spending on gold jewellery shot up 31 per cent annually to $47 billion – the highest level of spending for a first quarter – as the higher price of gold during the period offset weak demand.
In the broader Middle East, gold jewellery demand fell 23 per cent year-on-year to 34.5 tonnes in the three months to the end of March. Demand in the UAE, the Arab world's second-largest economy, dropped by 40 per cent to 4.7 tonnes. In Saudi Arabia, quarterly volume declined 13 per cent annually to 12.7 tonnes.
Despite the decreased volumes in the region, the aggregate value of jewellery demand rose 30 per cent year-on-year to hit a record $5 billion, on the back of higher price of gold.
Ramadan and the Eid Al Fitr break in February and March offered some support to gold jewellery demand, but the combination of record gold prices and the outbreak of the Iran war caused demand stagnation in some markets, the London-based WGC said.
"The market is showing a mix of caution and opportunism: strong buying during price dips, as seen during festive periods," Mr Siroya said. "Gold prices softened at the right time and outbound travel was curtailed, leaving residents with higher disposable savings, much of which flowed into jewellery purchases."
Historic levels
Even in India, where gold jewellery is an investment and cultural commodity, demand slid 19 per cent annually – and 55 per cent quarter-on-quarter – to 66.1 tonnes during the quarter.
"In a continuation of the recent theme, gold jewellery consumers were somewhat at the mercy of the gold price," analysts at the WGC said. "Demand was strangled by the price rose to record highs in January – even after its subsequent correction gold remained above prior historical levels."
Overall, total gold demand in the first quarter edged up 2 per cent annually to about 1,231 tonnes, with its value jumping 74 per cent to a record $193 billion. Bar and coin demand grew 42 per cent 474 tonnes, the second-highest quarter on record.
"Geopolitics remain front and centre in our outlook for gold demand in 2026 ... investment and central bank demand will be supported by ongoing geopolitical risk, with further investment impetus from elevated inflation and persistent high gold prices," the WGC said. "Jewellery demand will remain under pressure for similar reasons, albeit that spending will likely remain resilient."
On the rise
Investments channelled into gold assets are paying dividends amid the conflict, as the asset is widely considered to be safe haven and a hedge against inflation.
The 42 per cent annual jump in first-quarter demand for bars and coins to 474 tonnes was largely boosted by US funds outflows in March, while central banks' gold buying rose 3 per cent to 244 tonnes, WGC data shows.
Even artificial intelligence has an effect, as demand for gold used in technology rose 1 per cent to 82 tonnes, mainly owing to the continued growth in AI infrastructure.
"Jewellery volumes are declining as high gold prices reduce affordability ...[but] prices remain elevated not because demand is weak, but because it has shifted into ETFs [exchange-traded funds], bars and other investment channels," Ashish Vijay, founder and owner of Tiara Gems and Jewellery, told The National. "Ongoing geopolitical tensions have strengthened gold’s safe-haven appeal, driving investment inflows and further suppressing consumer jewellery demand."
Gold surged to a record $5,608.35 an ounce in January, although it has pulled back from the highs, down nearly 19 per cent at above $4,500 level. It has been up nearly 14 per cent in the past six months and nearly a third over the past years.
Over the course of the conflict, now in its third month, the asset is down more than 13 per cent, from gold's $5,270. It has dropped nearly 3 per cent over the past 30 days.
"Markets priced in the US-Iran tensions, which boosted inflation concerns and led to a spike in the dollar, along with expectations of higher-for-longer interest rates," Vijay Valecha, chief investment officer of Dubai-based Century Financial, told The National.
"It could be safe to say that indirectly, through the war, there was a tangible effect on gold prices ... either a complete reopening of the Strait [of Hormuz], with global shipping restarting and energy prices falling, could abate inflation and rate-hike expectations, supporting gold."
Should you buy gold?
For jewellery enthusiasts and investors, buying into gold has its respective intentions and, at current levels, should be viewed as a strategic allocation rather than a short-term trade, said Mr Siroya, who is also managing director of Siroya Jewellers.
"While prices are elevated, gold remains an effective hedge against inflation, currency fluctuations and geopolitical risks," he said. "For investors, a staggered buying approach is advisable. For consumers, especially in jewellery, buying tends to be opportunistic – linked to price dips rather than continuous accumulation."
The decline in gold prices also presents an opportunity for investors' risk-reward plays and, for consumers, interest remains, especially in the UAE, where the metal is still a cultural symbol and investment tool.
"From a macro perspective, ongoing geopolitical tensions ... along with rising oil-driven inflation expectations and continued currency uncertainty are likely to support gold demand and keep prices well supported," Mr Valecha said. "The recent price correction makes current levels more attractive for entry. Overall, gold remains a buy supported less by jewellery demand and more by its increasing role as a strategic hedge and portfolio diversifier."
