Gold prices may be rising, but the precious metal is failing to attract investors as concerns about policy normalization by central banks weighs on demand and creates a conflicted outlook for the commodity.

Demand for gold-based exchange traded funds (ETF) fell 76 percent in the last quarter, according to the World Gold Council’s latest gold demand trends report.

“Last year’s growth was solely down to record ETF inflows, while consumer demand slumped. So far this year we have seen steady ETF inflows in Europe and the U.S., jewellery demand has recovered with good growth in India, while retail investment and technology demand is up too,” Alistair Hewitt, head of market intelligence at the World Gold Council, said in a press release.

The report found demand for gold slowed 10 percent to 953 tonnes in the second quarter compared to the year before, and 14 percent to 2,003 tonnes in the first half of 2017. Other sources of demand, such as for jewellery, technology, and from central banks increased, as did demand for physical gold bars and coins.

These areas of demand tend to increase in response to gold prices, and are unlikely to drive gold prices higher, according to Adrian Ash, director of research at BullionVault, says told CNBC via email.

“Asian small-bar and coin demand, like jewellery and even central-bank demand, typically rises on falling or flat prices,” he told CNBC via email.

“Larger investor interest is needed to push gold prices higher. For that, the long-delayed correction or bust in world stock markets looks the most likely trigger.”

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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