The gold price has fallen about 6% so far this year and is currently trading at US$1810/oz.
There will still be a supportive environment for gold prices in the second half of 2021 amid concern about inflation although "not all investors are aligned on whether inflation will be transient or permanent", according to Juan Carlos Artigas, WGC head of research.
However, the prospect of rising interest rates, which traditionally means a falloff in investment gold demand could also have unintended consequences, which may boost the gold price, according to the WGC outlook.
"The negative impact that higher rates could have will likely be offset by the longer-lasting effects and unintended consequences of expansionary monetary and fiscal policies created to support the global economy. These may include inflation, currency debasement, and higher exposure to risk-on assets in portfolios," said the WGC.
The expected post-COVID economic recovery will also fuel investment and consumption of gold in jewellery, technology and electronics, said Artigas. However, this recovery is likely to be hugely influenced by the success of the rollout of vaccination programmes globally, and whether new strains of the virus take hold. The new Delta variant that has already ravaged key gold markets including India, also poses a huge risk to gold demand, Artigas said.
Elsewhere, there are also further positives for gold from an investment perspective, according to new research by Coalition Greenwich in conjunction with the WGC, which found investors are moving to rebalance their portfolio in a post-COVID world in favour of gold.
"Investors are making a shift to their portfolio allocation, and one of the of the biggest changes is adding gold into their portfolio," said Andrew McCollum, head of investment management at Coalition Greenwich.
The research said 38% of institutional investors who currently hold gold allocations plan to increase their allocations to gold in the next three years versus 8% who plan to decrease. Meanwhile, another 40% of institutional investors who do not have gold exposure plan to make an investment in that time frame.
"It's not just about inflation, the diversification benefit [of gold] was cited as the biggest advantage among investors surveyed," said McCollum.
Enhancing long-term risk-adjusted returns was also the other major advantage cited.
"Gold has multiple roles in investment portfolios and is far from a sleepy asset," he added.
Elsewhere, inflows to global gold-backed ETFs rose slightly in the first half - up 0.1% to $191 million with rising investments into North American and Asian funds offset by outflows from European funds.