Even though demand for gold witnessed a fall in India due to the high prices, gold exchange traded funds (ETFs) are going strong still.

In fact gold ETFs are expected to see an upward trend on the back of uncertainties in the global financial system. Gold ETFs usually take cue from the rise or fall in the gold prices tandem with price variation of the commodity.

Though Indian consumers are price-sensitive, eroding return on equities in the recent past may drive them to invest in gold ETFs.

Gold price is hovering above $1,200 an ounce in recent time due to the ongoing debt crisis in the European economies. Further, weakening euro against the dollar and eroding value in the global equities market is also pushing up prices.

According to the World Gold Council estimates, investors bought 5.6 tonnes of gold ETFs in the first quarter of this year worldwide. As a result, the total amount of gold the council monitors in ETFs hit a new record of 1,768 tonnes worth approximately $63.4 billion.

Even Indian investors had showed a sound appetite for the commodity in the special trading session in BSE and NSE during 'Akshaya Tritiya.'

NSE, alone, had witnessed a turnover of Rs 172.39 crore in comparison to turnover of Rs 20 crore in a normal trading day.

Total assets under management of gold ETFs crossed Rs 1,700 crore in April compared to Rs 700 crore in April 2009. In April, alone, gold ETFs saw flows of approximately Rs 50 crore.

According to market estimates, since its launch in 2007, gold ETFs have emerged as a strong asset class, generating more than 27 per cent return on CAGR (compound annualised growth rate) in the past three years in comparison to just more than 4 per cent returns from the equities market.

Net volume in gold ETFs turned negative in May as Indian investors are pretty price sensitive.