SEBI’s Valuation Shift: Domestic Price Discovery for Gold & Silver ETFs

In a significant regulatory development, the Securities and Exchange Board of India has introduced a new valuation methodology for physical Gold and Silver held by mutual fund schemes, particularly Gold and Silver Exchange Traded Funds (ETFs).

This circular, issued on 26 February 2026, fundamentally changes how bullion-backed schemes determine their Net Asset Value (NAV), transitioning from reliance on international benchmark pricing to a domestically anchored valuation mechanism.

The Earlier Framework

Until now, physical Gold and Silver held by ETFs were valued based on the AM fixing prices of the London Bullion Market Association (LBMA). The final valuation required multiple adjustments, including:

• Metric conversion
• Currency conversion
• Transportation costs
• Customs duty
• Applicable taxes and levies
• Notional premium/discount adjustments

While this framework provided an internationally accepted benchmark, it introduced layers of adjustments that could create valuation variations and disconnect from real-time domestic price conditions.

What Has Changed?

Effective 1 April 2026, under Regulations 22(9) and 63(9) read with the Seventh Schedule of the SEBI (Mutual Funds) Regulations, 2026:

Mutual funds must now value physical Gold and Silver using:

Polled spot prices published by recognized stock exchanges, specifically those used for settlement of physically delivered bullion derivative contracts.

This shift reflects three major regulatory intentions:

1. Alignment with Domestic Market Conditions

Using exchange-published spot prices ensures valuations reflect actual Indian demand-supply dynamics, rather than international benchmark rates adjusted post-facto.

2. Increased Transparency

Recognized stock exchanges operate under SEBI’s regulatory supervision, ensuring compliance, surveillance, and standardized price discovery mechanisms.

3. Uniformity in Valuation Practices

A single, exchange-based polling mechanism reduces interpretational differences across Asset Management Companies (AMCs), enhancing comparability of NAVs.

Role of AMFI

The Association of Mutual Funds in India, in consultation with SEBI, will prescribe a uniform valuation policy to ensure consistent implementation across all AMCs.

This step minimizes operational divergence and reinforces governance consistency.

Strategic Implications

Impact on NAV Volatility

NAV movement may now track domestic bullion spot prices more closely, potentially reducing pricing distortions arising from international currency fluctuations.

Operational Adjustments for AMCs

AMCs will need to:

• Update valuation policies
• Modify NAV computation systems
• Ensure compliance with SEBI’s spot polling guidelines

Investor Perspective

For investors, this reform enhances:

• Transparency in NAV calculation
• Better correlation between ETF prices and Indian bullion markets
• Reduced complexity in valuation methodology

Regulatory Foundation

The circular has been issued under Section 11(1) of the SEBI Act read with Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, with the core objective of protecting investor interests and promoting orderly market development.

Broader Regulatory Signal

This reform reflects SEBI’s broader policy direction of:

• Strengthening domestic price discovery
• Reducing dependency on international benchmarks where viable
• Enhancing transparency in asset valuation frameworks

It also aligns with the increasing maturity of India’s commodities derivatives ecosystem and institutional market infrastructure.

The transition to exchange-published spot polling for Gold and Silver valuation is more than a technical adjustment — it represents a structural recalibration of valuation governance in bullion-backed mutual fund schemes.

By anchoring NAV determination to regulated domestic exchanges, SEBI has reinforced transparency, uniformity, and market integrity.

For AMCs and trustees, this is a compliance-driven operational shift. For investors, it is a move toward clearer and more reliable valuation mechanisms in precious metal investment products.