SEBI plans overhaul of gold, silver ETF valuation rules: Here’s what it means for mutual fund investors

Market regulator SEBI has proposed a serious change to standardise and simplify how mutual funds worth bodily gold and silver held through exchange-traded funds (ETFs), aiming for larger transparency and consistency.

In its session paper launched on Wednesday, SEBI has instructed that asset administration corporations (AMCs) ought to change from utilizing the London Bullion Market Affiliation (LBMA) costs to the spot costs printed by home commodity exchanges for valuing bodily gold and silver in ETF schemes.

Presently, gold and silver ETFs use LBMA’s AM fixing value (in USD per troy ounce) for valuation—gold with 995 purity and silver with 999 purity—transformed to INR and adjusted for duties and market situations. In the meantime, ETFs holding commodity derivatives already use home futures costs from exchanges like MCX, creating inconsistencies in how the identical underlying belongings are valued.

Why SEBI needs to alter the valuation technique

Standardisation: Completely different valuation bases for bodily holdings (LBMA value) and derivatives (home alternate value) have led to confusion and non-uniformity.

Relevance: Home spot costs higher mirror Indian demand and provide, customs duties, and real-time market situations.

Simplification: Eliminating USD-INR conversions and changes for import duties will streamline the valuation course of.

SEBI mentioned, “This transfer will help within the discount of duplication of efforts and likewise signify the market costs of gold and silver as per the home demand and provide situations.”

Want for a uniform home benchmark

SEBI can also be exploring the identification of a single home benchmark for gold and silver spot costs for use uniformly throughout the mutual fund business. At current, spot costs are sourced from a number of entities, commodity exchanges, jewellers’ associations, and index suppliers, resulting in additional inconsistency.

The regulator proposes that spot value polling methodologies by exchanges or regulated entities be made public, making certain truthful conduct and higher investor transparency. Spot costs are often derived from polling bodily market individuals like merchants, refiners, and importers.

What this implies for traders

• Valuations of gold and silver ETFs might grow to be extra constant and aligned with Indian costs, decreasing monitoring error.

• Traders may even see a extra clear and simplified NAV calculation, serving to them make higher funding choices.

• With a normal valuation technique throughout the mutual fund business, comparability between ETF schemes will enhance.

• SEBI has invited public feedback on the proposals till August 6, 2025.