Gold is becoming increasingly prominent among global central banks as the U.S. dollar's popularity wanes, according to a World Gold Council (WGC) report on Friday.

Global gold demand totaled 1,174 tonnes in the first quarter of the year, with a significant rise in central bank purchases, data from the WGC showed.

Specifically, central banks worldwide increased their gold reserves by 228 tonnes in the first quarter, with Singapore, China, and Turkey among the countries that increased the most.

Analysts believe that the role of gold as a safe haven asset continues to rise against the backdrop of banking crisis, sustained geopolitical tensions, and a challenging economic environment.

The U.S. quantitative easing policy fuels worry about the loss of purchasing power of holding U.S. bonds, while Russian overseas assets freeze sanctions generated more concern among non-U.S. allies, according to Zhu Bin, chief economist at Nanhua Futures.

"[Global] central banks purchasing gold assets in fact reflects their loss of confidence in the U.S. dollar as a safe asset," said Zhu.

Read more: BizBeat Ep. 627: Countries around the world finding ways to de-dollarize

The gold reserves of all central banks have increased by unprecedented amounts in the first quarter, according to Wang Lixin, CEO of WGC China.

The financial crisis of 2008 was the watershed event where central banks around the world shifted from "net sellers" to "net buyers" of gold. In the decade following the financial crisis, central banks have been pumping up their gold reserves. By 2022, central bank gold purchases hit 1,135.7 tonnes, amounting to almost a quarter of global gold demand.

Many central banks now regard gold as a safe asset substitute for the U.S. dollar and have pocketed large amounts of it, Zhu noted.

"At this point, they no longer pay attention to the currency fluctuation of the U.S. dollar, nor are they concerned over whether U.S. interest rates are falling or rising. They focus on security more than the economic viability," said Zhu.

The WGC predicts that central bank gold purchases will be the "cornerstone" supporting gold demand throughout the year. However, it is unlikely to surpass the historical high in 2022.

(Cover via CFP)