Gold & Silver ETFs: In a significant regulatory shift, the Securities and Exchange Board of India (SEBI) has directed mutual fund houses to value physical gold and silver holdings (ETFs) using domestic spot prices published by recognised stock exchanges. The new framework will come into force from April 1, 2026, marking a decisive move away from the LBMA benchmark system historically used by bullion-backed schemes.
The circular titled “Valuation of physical Gold and Silver held by mutual fund schemes” published by SEBI outlines the revised methodology, which applies to all mutual fund schemes holding physical bullion, including gold and silver exchange-traded funds (ETFs).
Gold & Silver ETFs Shift From LBMA
Until now, Indian gold and silver ETFs have relied on the London Bullion Market Association (LBMA) AM fixing prices. These global benchmark prices were adjusted for currency conversion, import duties, transportation costs, and domestic levies to derive Indian valuations.
However, under the revised norms, SEBI has mandated that mutual funds must use polled spot prices published by recognised Indian stock exchanges. These are the same prices used for settlement of physically delivered gold and silver derivatives contracts.
As stated in the SEBI circular, mutual funds shall value physical gold and silver using the polled spot prices used for settlement of physically delivered bullion derivatives contracts, effective April 01, 2026, SEBI.
This effectively anchors bullion fund valuations to domestic market price discovery rather than international reference rates.
Why This in Gold & Silver ETFs Matters?
The earlier LBMA-based system, while globally accepted, involved multiple adjustment layers. Currency fluctuations, changes in customs duties, and local taxes often introduce valuation variations between ETF net asset values (NAVs) and prevailing domestic bullion market prices.
By mandating Indian spot prices, SEBI aims to simplify the valuation chain and improve pricing accuracy during volatile global movements. Industry experts believe this could narrow the gap between ETF NAVs and actual trading prices in the Indian bullion market, thereby enhancing transparency.
For retail investors who use gold and silver ETFs either as tactical hedges or long-term portfolio diversifiers, NAVs are now expected to better reflect domestic bullion trends.
For India’s rapidly expanding ETF segment — particularly bullion-backed funds that have witnessed growing retail participation — the shift could enhance confidence, improve pricing efficiency, and align fund performance more closely with domestic market realities.
The April 2026 transition date gives mutual fund houses sufficient time to recalibrate valuation systems, but the long-term impact may be felt most strongly by investors who track gold and silver funds as core components of diversified portfolios.
FAQs
1. What is SEBI’s new rule for gold and silver mutual funds?
SEBI has mandated that mutual funds holding physical gold and silver must use domestic polled spot prices published by recognised Indian stock exchanges for valuation instead of LBMA AM fixing rates.
2. When will the new valuation framework come into effect?
The revised valuation methodology will be implemented from April 1, 2026.
3. Why is SEBI moving away from LBMA prices?
The earlier LBMA-based system required multiple adjustments such as currency conversion and customs duties. Using domestic spot prices simplifies valuation and aligns NAVs with Indian market conditions.
4. How will this affect gold and silver ETF investors?
The change is expected to reduce pricing gaps between ETF NAVs and actual domestic bullion prices, improve transparency, and better reflect Indian market trends.
5. Will this impact returns on gold and silver ETFs?
While the rule does not directly change market returns, it may improve pricing accuracy and reduce discrepancies caused by international benchmark adjustments, potentially making ETF valuations more consistent.
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