SEBI Plan for Gold and Silver ETF Valuation via Local Rates

The statement recorded by Akshat Garg (AVP, Choice Wealth) states," The proposal of SEBI for shifting Gold and Silver ETF (Exchange Traded Funds) valuation from LBMA-based rating to domestic commodity exchange spot pricing is a vital reform. This plan will bring uniformity in AMCs, eliminate discount adjustments and align conditions of local demand-supply with NAVs more accurately". 

Adding further, Garg also said," As India evidences the rise of gold ETF inflows in the middle of an unpredictable global environment, this step can enhance the participation of both retail and institutional investors. While there is a need to look after the polling mechanisms to ensure they remain robust and tamper-proof, this shift shows that SEBI desires to trust India's financial markets by using local, data-driven frameworks".

So, the Securities and Exchange Board of India (SEBI) has suggested reviewing the physical gold and silver values concerning gold and silver ETFs due to the expected uniformity in gold and silver valuation that this change can bring throughout the industry of Mutual Funds for the gold and silver ETF investments.

By August 6, 2025, SEBI intends to conduct a public feedback program on this proposal, which shows that SEBI's intention is to execute this practice soon after.

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At the moment, fund houses use LBMA (London Bullion Market Association) for managing ETFs based on gold and silver, pricing in US dollars as the benchmark, according to a consultation paper by SEBI.

Further, customs duty and other relevant taxes and levies are also likely to be included for the final valuation. The price is adjusted to match the Indian prices, which can be at a premium or discount to the LBMA prices, according to the demand and supply.

Currently, the mutual fund houses managing gold and silver ETFs are dealing with duplications of physical gold/ silver values held by mutual fund schemes. Each AMC uses a different reference to the domestic benchmark to figure out the necessary premium or discount, leading to non-uniform valuation practice for gold and silver across the MF industry. Also, because there is no specific regulatory direction, AMCs use their judgment for applying a premium or discount, which results in gold and silver valuations varying.

The gold and silver ETCDs (Exchange Traded Commodity Derivatives) carried by mutual fund schemes are valued based on the closing futures prices on Indian commodity exchanges, unlike the physical gold/silver held by gold and silver ETFs that are valued according to the LBMA process.

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Therefore, if any ETF based on gold or silver invests in both physical gold/ silver and ETCDs, two different sources are used for the valuation in that scheme.

So, SEBI is thinking about using the spot prices from domestic commodity exchanges for the valuation of gold and silver. They are also looking at doing a poll to calculate the spot prices for both gold and silver.