Gold is considered to be the safest bet against inflation.
The liquidity released through the second tranche of European Long Term Refinancing Operations (LTRO) is also expected to increase the flows into gold.
The liquidity situation has been strengthened further with the Bank of England and US Federal reserve pumping in money through expansionary open market operations.
Gold has risen by almost 9.3 per cent year - to - date in 2012.
According to data of Commodity Futures Trading Commission (CFTC), hedge fund managers have increased their bets on higher prices of gold by 10 per cent in the week ended on February 28th.
Net long positions in gold at CFTC stand at 197,552 contracts.