The year-on-year drop was 7% and the last time demand was lower in the January-March period was 2008, according to the World Gold Council's Gold Demand Trends report for the March quarter.
It attributed the low level to falling investment demand for gold bars and gold-backed exchange-traded funds (ETFs) and a subdued gold price.
Total investment demand for the quarter was 27% lower on the year at 287t, while total consumer demand was 743t, down 6%.
The weakness in gold bar and coin investment in the quarter was driven by China, Germany and the US, with global demand falling 15% to 254.9t.
The council said investor interest was undermined by the range-bound gold price. China's demand had been comparatively stronger a year ago.
The quarter was the fifth straight three-month period that ETFs saw inflows, although at 32.4t, they were down 66% from a year ago. Growth was seen in North America only and offset by outflows in other countries.
"Investment in the first quarter was mixed, with rising interest rates on the one hand, and a sharp spike in stock market volatility on the other. As gold prices were relatively subdued, many investors lacked a clear signal," the WGC said.
Global demand for gold jewellery edged 1% lower on the year to 488t, with higher Chinese and US demand offset by lower Indian demand.
Holiday demand helped Chinese demand and a supportive economic backdrop drove sales in the US, while the weakening rupee against rising gold prices slashed Indian demand by 12%.
The WGC said central banks added 116t to global official reserves in the March quarter, up 42% year-on-year and the highest March-quarter total for four years and in line with average quarterly purchases since the beginning of 2010.
Russia, Turkey and Kazakhstan were on the top of the list of central banks buying gold, adding a combined 91t.
In the technology sector, demand for the yellow metal rose 4% year-on-year to 82t, with the wireless sector a key growth area with increasing use of three-dimensional sensors for facial recognition on smartphones, gaming consoles and security systems.
On the other hand, total supply rose 3% on the year in the March 2018 quarter to 1,064t, due to slightly higher mine production and net hedging totalling 5.8t.
Mine production for the quarter was 770t, 1% higher on the year, while recycling levels were steady at 288t.
Output from China fell 8% year-on-year due to stricter environmental regulations, while production from Peru and South Africa both fell 4%.
Peru output was affected by lower production at Yanacocha and Misquichuilca, while seasonal factors and higher costs due to a strengthening rand impacted South African output. There were also declines in production from the US and Argentina.
The declines were offset by 12% higher production from Indonesia and Canada.
Higher grades at Grasberg drove the gains in Indonesia, while the ramp-up of new mines started in 2017 increased Canada's output.
Russian production was also 4% higher in the March quarter, with output trending upwards and further boosts from Natalka's ramp-up towards full production.
WGC head of market intelligence Alistair Hewitt said the environment for gold had been solid in the March quarter due to relatively solid global economic growth and the return of volatility in the capital markets in February.
"Although demand was down year-on-year, we saw encouraging levels of jewellery demand in China, the US and Europe, continued growth in the technology sector, and steady inflows into ETFs, albeit at a slower pace than last year. Solid inflows into central bank reserves also highlight the ongoing relevance of gold as a strategic asset for institutional investors," he said.
