SEBI Proposes Shift to Domestic Spot Prices for Gold and Silver ETF Valuation
By Shishta Dutta | Published at: Jul 16, 2025 06:28 PM IST
Mumbai, July 16, 2025 — The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing a significant shift in the valuation methodology for physical gold and silver held by Exchange Traded Funds (ETFs), according to which gold and silver ETFs’ valuation will be done using domestic spot prices. Thus, this could be a move away from international prices, which are relatively more volatile.
The move aims to standardise and simplify valuation practices by replacing the current reliance on London Bullion Market Association (LBMA) prices with domestic spot prices published by Indian commodity exchanges.
Existing Valuation Method (Illustrated Example)
| Component | Value |
|---|---|
| LBMA Gold Price (USD/oz) | $2,812 |
| Converted Price (USD/10g) | $899.56 |
| INR Conversion Rate | ₹86.64 |
| Price in INR (10g, incl. customs) | ₹82,614.04 |
| Spot Price on Domestic Exchange (10g) | ₹81,798 |
| Final Landed Price (after ₹816.04 discount) | ₹81,798 |
The current model leads to discrepancies in ETF performance due to differences in how AMCs apply the notional premium/discount.
SEBI’s New Proposal: Use of Domestic Spot Prices
Under the new proposal, SEBI suggests using polled spot prices published by SEBI-regulated Indian commodity exchanges, such as MCX, for valuing physical gold and silver. These spot prices already reflect local demand and supply dynamics and would eliminate subjective adjustments applied by individual AMCs.
The paper noted that “Using regulated domestic spot prices will ensure uniformity across the industry, eliminate duplication of effort, and enhance transparency,” while highligthing the key changes:
- Discontinue the use of LBMA prices for valuation.
- Mandate use of daily spot prices published by domestic commodity exchanges.
- Align spot polling processes with SEBI’s Master Circular on commodity derivatives.
Transparency in Spot Price Polling
SEBI also emphasises the need for transparent and regulated polling mechanisms. As outlined on page 6 of the paper:
- Spot prices must be derived from a diverse poll panel including importers, exporters, and traders.
- Use of trimmed mean methodology to eliminate outliers.
- Public disclosure of polling policies and participant data.
- Compliance with SEBI’s Master Circular provisions, such as increasing sample size and reviewing biased polling behaviour.
Public Feedback Invited
SEBI has requested stakeholders to provide their views by August 6, 2025, via its online consultation portal. Comments are specifically invited on:
- Replacing LBMA pricing with domestic spot rates.
- Identifying the most appropriate domestic benchmark.
- Enhancing transparency and governance in spot price polling mechanisms.
REF: https://www.sebi.gov.in/reports-and-statistics/reports/jul-2025/consultation-paper-on-review-of-valuation-of-physical-gold-and-silver-held-by-gold-and-silver-exchange-traded-funds-etfs-_95348.html
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