In a significant move which is aimed at improving transparency and standardising the valuation practices, SEBI (Securities and Exchange Board of India) has directed mutual funds to value physical silver and gold holdings with the help of exchange-published polled spot prices.
This new and revised framework will come into force on April 1, 2026 and will replace the current international benchmark-linked valuation system.
What Changes Under the New Norms
On February 26, a circular was issued which said that the mutual funds must value physical silver and gold based on the polled spot prices, which are published by a recognised stock exchange. These prices are used for the settlement of physically delivered gold and silver derivatives contracts.
The regulator clarified that the spot polling mechanism needs to adhere to SEBI’s prescribed guidelines and compliance standards. This decision follows deliberation by the Mutual Fund Advisory Committee and a public consultation process with industry stakeholders.
Explaining this rationale, SEBI said the stock exchanges operate under a regulated framework with strict transparency and disclosure requirements. Using exchange-published spot prices, therefore, it would ensure valuations reflect domestic market conditions while bringing uniformity across mutual fund schemes.
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Moving Away from LBMA Pricing
As of now, the silver and gold Exchange Traded Funds (ETFs) use AM fixing prices to value their physical holdings. These prices are set by the London Bullion Market Association (LBMA).
The LBMA prices are adjusted for currency and metric conversions in addition to transportation costs, customs duties, taxes, levies, and a notional premium or discount to derive domestic valuations under this system.
This new framework will mark a clear shift away from their high reliance on the international bullion benchmark. And more specifically towards the anchored pricing mechanism.
Impact on Gold and Silver ETF Investors
Now, as for investors, this change will mean that the NAVs or Net Asset Values of gold and silver ETFs are now going to be determined with the help of domestic exchange spot prices instead of benchmarks globally.
The move is aimed at:
- Enhance transparency in NAV computation
- Improve comparability across schemes
- Reduce valuation discrepancies arising from varied adjustment methodologies
Participants in the market note that while gold and silver ETFs broadly track underlying metal prices, the differences in their valuation standards, tracking efficiency and liquidity can result in marginal return variations between schemes. A uniform, exchange-based spot valuation system could help narrow such gaps.
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Regulatory Alignment and Implementation
The revised norms will take effect from April 1, 2026, aligning with the implementation of the SEBI (Mutual Funds) Regulations, 2026, notified earlier this year.
The Association of Mutual Funds in India (Amfi), in consultation with SEBI, will frame a uniform policy outlining the operational framework for implementing the revised valuation mechanism.
