Demand for exchange traded funds that invest in gold is forecast to rise this year as investors look for options outside the stock market, according to a report.

Ajay Mitra, managing director of India and the Middle East at the World Gold Council, said demand for gold ETFs in India is likely to “explode,” Reuters reported.

High inflation and increased familiarity with ETFs are expected to drive the demand, according to the article. India had an inflation rate of about 9% in August 2011.

Gold ETFs have been heavily traded this year, with the SDPR Gold Shares (NYSEArca: GLD) briefly holding the most assets under management for an ETF. The gold fund is up about 18% year to date.

“Clearly people are seeing convenience in the form of ETF, going through the same broker which he has for equities,” Mitra said in the Reuters story. [Gold ETF Bulls Undaunted After September Drop]

According to the Association of Mutual Funds in India, gold ETFs experienced a record high monthly inflow in September, reports Kayezad E. Adajania for livemint.

“Due to the approaching festive season, investors have bought gold ETFs. Also, many investors seem to have bought gold after the recent correction,” said Kapil Mokashi, assistant manager-equity advisory, Sharekhan Ltd.

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