sebi-gold-silver-etf-valuation-domestic-spot-price-change-august-2025

Market regulator SEBI has proposed a major change to standardise and simplify how mutual funds value physical gold and silver held via exchange-traded funds (ETFs), aiming for greater transparency and consistency.

In its consultation paper released on Wednesday, SEBI has suggested that asset management companies (AMCs) should switch from using the London Bullion Market Association (LBMA) prices to the spot prices published by domestic commodity exchanges for valuing physical gold and silver in ETF schemes.

Currently, gold and silver ETFs use LBMA’s AM fixing price (in USD per troy ounce) for valuation—gold with 995 purity and silver with 999 purity—converted to INR and adjusted for duties and market conditions. Meanwhile, ETFs holding commodity derivatives already use domestic futures prices from exchanges like MCX, creating inconsistencies in how the same underlying assets are valued.

Why SEBI wants to change the valuation method

Standardisation: Different valuation bases for physical holdings (LBMA price) and derivatives (domestic exchange price) have led to confusion and non-uniformity.

Relevance: Domestic spot prices better reflect Indian demand and supply, customs duties, and real-time market conditions.

Simplification: Eliminating USD-INR conversions and adjustments for import duties will streamline the valuation process.

SEBI said, “This move will aid in the reduction of duplication of efforts and also represent the market prices of gold and silver as per the domestic demand and supply scenarios.”

Need for a uniform domestic benchmark

SEBI is also exploring the identification of a single domestic benchmark for gold and silver spot prices to be used uniformly across the mutual fund industry. At present, spot prices are sourced from multiple entities—commodity exchanges, jewellers’ associations, index providers—leading to further inconsistency.

The regulator proposes that spot price polling methodologies by exchanges or regulated entities be made public, ensuring fair conduct and better investor transparency. Spot prices are usually derived from polling physical market participants like traders, refiners, and importers.

What this means for investors

• Valuations of gold and silver ETFs may become more consistent and aligned with Indian prices, reducing tracking error.

• Investors may see a more transparent and simplified NAV calculation, helping them make better investment decisions.

• With a standard valuation method across the mutual fund industry, comparability between ETF schemes will improve.

• SEBI has invited public comments on the proposals until August 6, 2025.