The growth of assets under gold exchange-traded funds (ETFs) in India slowed to 18 per cent in the fiscal year ended March 31, 2013, compared with an average of more than 100 per cent since inception in 2007, as investors sought refuge in debt instruments due to sagging gold prices.

While gold prices in India, the world's biggest buyer of the metal, have fallen 10 percent from their peak in late November, a term deposit in a bank for more than five years could still fetch more than 9 percent.

"When interest rates were high, some investors shifted from gold to debt to lock in high rates," said Chirag Mehta, fund manager at Quantum Asset Management Company Private Ltd.

India has 14 gold exchange-traded funds.

Assets under management with 14 Indian gold exchange traded funds grew 18 pe rcent to 116.48 billion rupees in the year to March 2013, data from industry body Association of Mutual Funds in India (AMFI) showed.

"Relative economic tightness on account of slowdown has also led to a decline in net gold consumption," said Mehta. The government hiked the import duty on gold by 50 percent to 6 percent in January as a means to contain the record-high current account deficit.

Industry participants said growth of ETFs in the next fiscal would depend upon price expectations in the short term.

"We are starting to see some buying at these levels - if that's the reflection of price expectations, then people may be turning positive," said Mehta.

On Wednesday, Goldman Sachs cut its gold price forecast for a second time in six weeks, citing expectations for an acceleration in U.S. economic growth.

The bank lowered its 2013 average gold price forecast to $1,545 an ounce from $1,610 and its 2014 price view to $1,350 an ounce from $1,490.

"Investment climate is bad. Domestic situation is dicey due to elections ahead and high current account deficit. My guess is people have booked profits and are waiting to enter again once they see a bigger fall," said Gnanasekar Thiagarajan, director with Mumbai-based Commtrendz Research.

Keywords: gold exchange-traded funds ,ETFs,gold prices, metal,investors, Quantum Asset Management Company Private Ltd, Mutual Funds ,AMFI,ETFs ,elections , booked profits,Business news