SEBI plans overhaul of gold, silver ETF valuation guidelines: Here is what it means for mutual fund buyers

Market regulator SEBI has proposed a significant change to standardise and simplify how mutual funds worth bodily gold and silver held by way of exchange-traded funds (ETFs), aiming for better transparency and consistency.

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

At present, 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 circumstances. In the meantime, ETFs holding commodity derivatives already use home futures costs from exchanges like MCX, creating inconsistencies in how the identical underlying property are valued.

Why SEBI needs to vary the valuation technique

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

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

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

SEBI stated, “This transfer will help within the discount of duplication of efforts and in addition characterize the market costs of gold and silver as per the home demand and provide situations.”

Want for a uniform home benchmark

SEBI can 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, guaranteeing truthful conduct and higher investor transparency. Spot costs are normally derived from polling bodily market contributors like merchants, refiners, and importers.

What this implies for buyers

• Valuations of gold and silver ETFs could change into extra constant and aligned with Indian costs, decreasing monitoring error.

• Buyers might even see a extra clear and simplified NAV calculation, serving to them make higher funding selections.

• With a regular 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.