Gold spot prices have managed to increase this year to $1,268.36, up about 10 percent year to date. This price rise may have weighed on investor demand for gold-backed ETFs, according to the World Gold Council report.

“This led to some investors taking a more cautious approach, reluctant to build positions after a strong price move. Others used it as an opportunity to take profits,” the report said.

Gold’s price has risen this year due to the weakening dollar, according to Will Rhind, founder and CEO of ETF company GraniteShares.

“When the dollar falls, gold typically rises,” he told CNBC via email.

“The dollar bull market over the last few years has been a major headwind for gold and commodities more broadly. With the dollar seemingly in decline again, this creates a tailwind for gold.

Rhind said his company was positive on its outlook for gold, as investors are keen to use the commodity as a diversifier in their portfolios and reduce risk as equity markets trade at elevated levels.

Other analysts were more cautious on their outlook for gold. Joni Teves, UBS strategist, warns investor participation in the gold market is limited.

“Many investors are keeping an eye on the gold market and continue to appreciate gold’s value as a diversifier in a portfolio, yet few have been actively involved in putting on meaningful, strategic positions. Subdued investor participation has been an important factor holding gold back,” she said in macro strategy note published Monday.

One reason for investor hesitation, according to Teves, is the expectation of policy normalization by central banks such as the Federal Reserve and European Central Bank at some point this year. Higher interest rates make gold, which pays no dividend or interest, a less attractive investment.

As a result, gold prices may be locked in place in the near term, according to Conor Rowley, Credit Suisse research analyst.

“A weak U.S. dollar and disappointing inflation expectations could continue to suppress real interest rates and present upside risk to the gold price,” he said in an equity research note published Tuesday.

However, Rowley says the Fed is expected to announce it will taper asset purchases from September and raise interest rates in December, which would keep gold prices capped.

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