Gold and Silver ETF Valuation in India: SEBI Proposes Shift to Domestic Spot Prices

Gold and Silver ETF Valuation in India May Shift to Domestic Spot Prices – SEBI’s New Proposal

SEBI Proposes Major Overhaul in Gold and Silver ETF Valuation in India

In a move set to reshape the way gold and silver Exchange Traded Funds (ETFs) are valued in India, the Securities and Exchange Board of India (SEBI) has floated a consultation paper inviting public comments until 6 August 2025. The regulator proposes a shift from global benchmarks like LBMA prices to domestic spot prices published by Indian commodity exchanges such as MCX.

The aim is to bring uniformity, simplicity, and transparency in how ETFs holding physical gold and silver are valued—an issue that has long seen inconsistency across asset management companies (AMCs).

Current Practice: Reliance on International LBMA Price

At present, fund houses managing gold and silver ETFs follow a multi-step valuation process:

• Start with London Bullion Market Association (LBMA) gold/silver price in USD
• Convert it into INR based on prevailing forex rates
• Adjust for customs duty, local taxes, and a premium/discount based on Indian market dynamics

This system allows each AMC to apply its own methodology for adjustments, leading to non-uniformity and lack of standardization across the mutual fund industry.

SEBI’s Proposed Change: Domestic Spot Prices as the Benchmark

SEBI’s latest proposal recommends using spot prices from Indian commodity exchanges, like those published by the Multi Commodity Exchange (MCX). These prices are derived from a panel comprising jewellers, bullion traders, and importers, reflecting real-time domestic demand and supply.

What SEBI Noted:

“Presently, different AMCs use different sources of domestic benchmark to apply necessary premium/discount, resulting in non-uniform valuation practices. In the absence of regulatory direction, AMCs use discretion, leading to varied gold/silver valuation across the mutual fund industry.”

Further, SEBI acknowledged that multiple index providers and jeweller associations already publish spot prices suited to Indian market conditions.

Industry Response: Mixed Views on Practicality

While SEBI’s intent to simplify and localize ETF valuation has been broadly welcomed, it has also sparked concern among industry veterans.

💬 Surendra Mehta, National Secretary, IBJA:

“The spot prices published by commodity exchanges are declared only once daily at 4:30 pm, whereas the global bullion markets operate nearly 23 hours a day. This mismatch could result in valuation gaps and potential investor confusion.”

Mehta argued that LBMA prices offer global uniformity, and since the Reserve Bank of India (RBI) uses IBJA prices for Sovereign Gold Bonds and loan collateral assessments, IBJA pricing could serve ETF valuations better than exchange spot prices.

🔍 Understanding the Proposed Valuation Mechanism

💡 What Are Gold and Silver ETFs?

For those new to the concept, Exchange Traded Funds (ETFs) are mutual fund instruments that track an asset, sector, or commodity and are traded on stock exchanges like equity shares. In the case of gold and silver ETFs, the underlying asset is physical bullion, and the value of the fund is directly influenced by bullion prices.

📣 Why This Proposal Matters for Indian Investors

This reform may have significant implications for:

• Transparency: Uniform valuation standards across AMCs
• Market Linkage: Better alignment with domestic trading and pricing
• Investor Confidence: Reduced ambiguity in NAV calculation for ETFs
• Simplification: Avoiding layers of conversion, adjustment, and discretion

At the same time, concerns remain over timing gaps, volatility mismatch, and global arbitrage risks.

📌 What’s Next?

SEBI has invited all stakeholders—including mutual fund houses, investor associations, bullion traders, and retail investors—to share their feedback on the consultation paper by 6 August 2025. Based on these responses, a final framework may be issued later this year.

Disclaimer

The information provided in this article is intended for general educational and informational purposes only. Gold and Silver ETF Valuation in India It does not constitute financial, legal, or investment advice. Readers are advised to consult qualified professionals or financial advisors before making any investment decisions based on this content. Estabizz Fintech Pvt. Ltd. bears no liability for any loss incurred due to actions taken based on this article. For official policy positions, refer to SEBI or other authorised institutions.

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