SEBI Mandates Exchange Spot Prices for Valuation of Gold and Silver Held by Mutual Funds

The Securities and Exchange Board of India (SEBI) has revised the valuation framework for physical gold and silver held by mutual fund schemes, directing fund houses to use exchange-published polled spot prices instead of international benchmarks.

The new norms, which will come into effect from April 1, 2026, aim to bring uniformity, improve transparency, and ensure that valuations reflect domestic market conditions more accurately.

What Does the New Rule Say?

In a circular issued on February 26, SEBI said that mutual funds must value physical gold and silver using the polled spot prices published by recognised stock exchanges. These are the same prices used for settlement of physically delivered gold and silver derivatives contracts.

The regulator also clarified that the spot polling mechanism must comply with SEBI’s prescribed guidelines.

The move follows discussions in the Mutual Fund Advisory Committee and consultations with market stakeholders, signalling that the change is part of a broader effort to standardise valuation practices across schemes.

Shift Away from LBMA-Based Pricing

Currently, gold and silver Exchange Traded Funds (ETFs) in India rely on the London Bullion Market Association (LBMA) AM fixing prices for valuation.

Under the existing system, LBMA prices are converted into metric units, adjusted for currency fluctuations, and loaded with transportation costs, customs duty, taxes, and a notional premium or discount to arrive at domestic valuations.

SEBI noted that since Indian stock exchanges operate under a regulated and transparent framework, using their published spot prices would lead to valuations that better reflect domestic conditions and ensure consistency across schemes.

What it Means for ETF Investors?

For investors in gold and silver ETFs, the change is significant but not disruptive.

The new framework is expected to:

• Improve transparency in Net Asset Value (NAV) calculations
• Enhance uniformity across fund houses
• Reduce discrepancies arising from varied valuation adjustments
• Make scheme comparisons easier

While gold and silver ETFs broadly track underlying metal prices, tracking differences can arise due to valuation methodologies, liquidity, and expense ratios. A uniform domestic spot-based pricing mechanism could help narrow such variations.

Implementation and Regulatory Alignment

The revised norms will take effect from April 1, 2026, aligning with the implementation of the SEBI (Mutual Funds) Regulations, 2026.

The Association of Mutual Funds in India (AMFI), in consultation with SEBI, will lay down a uniform policy framework for implementing the new valuation methodology.

Read more: GDP Data: National Accounts Data with the FY 2022–23 Base Year to Release on February 27, 2026.

Conclusion

SEBI’s decision to shift from LBMA-based pricing to exchange-published domestic spot prices marks an important step toward strengthening transparency and consistency in commodity-backed mutual fund schemes.

While the change may not alter the fundamental performance of gold and silver ETFs, it enhances clarity in valuation and brings India’s ETF ecosystem closer to a standardised, regulator-aligned framework, offering investors greater confidence in how their assets are priced.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

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