Bar and coin investment, however, was healthy, at 290 tonnes, an increase of 9% year-on-year, while demand firmed slightly in both the jewellery and technology sectors.
According to the latest Gold Demand Trends report by the World Gold Council (WGC), Indian consumers enjoyed a period of relative stability in the domestic market.
The council said central banks' demand for gold continued at a much slower pace.
Interestingly, higher demand in India was the prime reason for the overall jewellery demand gaining marginally at 481 tonnes.
The WGC's Gold Demand Trends quarterly report showed global gold demand was 1,034.5 tonnes, with the year-on-year decline reflecting the strength of the first quarter of 2016 (which was the strongest ever first quarter).
Gold prices traded at $1,235.66 an ounce on Thursday, while the WGC said the metal was unlikely to see a return to last year's record high prices - at least until Trump unveils his tax plans.
In addition, central bank demand fell by 27% to 76.3 t, almost 28 t less than in the first quarter of 2016.
The report said China's purchasing program was on pause during the quarter, as its foreign exchange reserves remained under pressure.
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In Saudi Arabia low oil prices, higher living costs, salary cuts and delayed payments to contractors were among the factors that dented demand, which fell almost 13 per cent to 11.3 tonnes from 12.9 tonnes a year-earlier.
The Trump administration's promised infrastructure boom and the threat of U.S. interest rate rises has quelled demand for gold, despite a recent clamour for safety by Chinese investors.
The government's push for transparency in India's economy began to take effect in the gold market, with a gradual shift towards electronic transactions, it said.
The total imports during January-March period rose by 112 per cent to 270.1 tonne from 127.4 tonne in Q1 2016.
"Fintech companies are also tapping into gold-backed products that reach young investors, which effectively popularizes gold－an investment conventionally believed to be a favored investment tool for senior-age investors", said a research note from Sinolink Securities Co.
Recycling decreased by 21% to 283t during the first quarter, from 360t during Q1 a year ago. Chinese gold demand in the given three month period fell 2%, at 176.5 tonne. 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.
"Investors, particularly individual investors, who wish to diversify their portfolio because of concern about the outlook for real estate and stock market, are having more interest in gold", said Roland Wang, WGC China managing director.