SEBI's New Valuation Rules for Gold and Silver ETFs

SEBI has changed how physical gold and silver held by mutual fund schemes will be valued. Until now, fund houses used an international benchmark, the London Bullion Market Association (LBMA) price, to calculate the daily Net Asset Value (NAV) of Gold and Silver ETFs. From April 1, 2026, they will use polled spot prices published by Indian stock exchanges instead.

The change was directed through a SEBI circular dated February 26, 2026. Here is why it was changed, and what it means for investors.

How Gold and Silver ETFs Were Valued Until Now

The LBMA publishes two prices each day, one in the morning (AM fixing) and one in the afternoon (PM fixing). Fund houses in India used the AM fixing price as their starting point.

Since this price is in US dollars and reflects international market conditions, several adjustments were needed before it could be used as an Indian valuation:

•    Currency conversion from USD to INR

•    Unit conversion from troy ounce to grams or kilograms

•    Addition of transportation costs, customs duty, and applicable taxes

•    A notional premium or discount based on domestic demand and supply

Each fund house applied these adjustments based on its own calculations. While the starting point, the LBMA price, was the same, the final NAV could vary slightly across fund houses because of differences in how each adjustment was applied.

This meant two Gold ETFs holding the same quantity of gold could show slightly different NAVs on the same day, not because of any difference in holdings, but because of differences in calculation.

What Changes from April 1, 2026

Mutual funds will now use polled spot prices published by recognized Indian stock exchanges, specifically those used for settling physically delivered gold and silver derivatives contracts. MCX is the primary exchange handling such contracts in India.

A polled spot price is derived by collecting quotes from multiple market participants and arriving at a single reference rate. Since this price is already in INR and reflects actual domestic trading, most of the earlier adjustments are no longer needed.

Why SEBI Made This Change

The core reason is straightforward. Domestic exchange prices reflect what gold and silver actually cost in India on any given day. The old method required multiple layers of adjustment to bridge the gap between an international benchmark and Indian market reality. Using a domestic price removes that complexity.

Stock exchanges in India are regulated by SEBI and are subject to transparency and compliance requirements. This makes them a more accountable source for valuation. It also ensures that all fund houses use the same price, which was not always the case under the earlier method.

What This Means for Investors

If you hold Gold ETFs or Silver ETFs, here is what this change means for you in practical terms.

NAV calculations will be simpler and more consistent

The NAV of your Gold or Silver ETF will now be based on a domestic exchange price rather than an internationally adjusted figure. This makes the calculation more straightforward and easier to understand.

Comparability across schemes will improve

If you are comparing two Gold ETFs from different fund houses, the difference in NAV should now reflect actual differences in the fund's holdings, costs, or efficiency, not just differences in how each fund house applied the old LBMA-based calculation.

Tracking error may reduce

Tracking error refers to the difference between the return of the ETF and the return of the underlying metal it tracks. Since the new valuation method is based on the same price source that is used in the physical gold and silver market in India, the ETF's NAV should more closely follow the actual domestic price of gold and silver. This could potentially reduce tracking error over time.

No action required for existing investors

If you already hold Gold ETFs or Silver ETFs, you do not need to do anything. The fund houses will implement the change on the back end. Your units will remain as they are, and the NAV will simply be calculated using the new price source from April 1, 2026.

New investors will see better transparency from the start

For those who invest in Gold or Silver ETFs after April 1, 2026, the NAV will be based on a domestic exchange price from day one, making it easier to understand how the fund's value is being calculated.

Conclusion

SEBI's decision to move Gold and Silver ETF valuation from the LBMA benchmark to domestic exchange spot prices is a straightforward and sensible regulatory update. It removes the complexity of multiple adjustments, brings the valuation in line with how gold and silver actually trade in India, and makes it easier for investors to compare schemes.

The change takes effect from April 1, 2026. For investors already holding Gold or Silver ETFs, there is nothing to do. For those considering an investment, this change adds a layer of transparency to how these funds are priced.

Disclaimer: The content is meant for education and general information purposes only.  Past performance is not indicative of future returns. Mutual Funds are non-exchange traded products, and INDstocks is merely acting as a mutual fund distributor. All disputes with respect to distribution activity, would not have access to the exchange investor redressal forum or arbitration mechanism. Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing. INDstocks Private Limited (formerly known as INDmoney Private Limited) 616, Level 6, Suncity Success Tower, Sector 65, Gurugram, 122005, SEBI Stock Broking Registration No: INZ000305337, Trading and Clearing Member of NSE (90267, M70042) and BSE, BSE StarMF (6779), AMFI Registration No: ARN-254564, SEBI Depository Participant Reg. No. IN-DP-690-2022, Depository Participant ID: CDSL 12095500, Research Analyst Registration No. INH000018948 BSE RA Enlistment No. 6428.