Description

SEBI mandates that from April 01, 2026, mutual funds must value physical Gold and Silver using polled spot prices published by recognized stock exchanges instead of LBMA AM fixing prices, to reflect domestic market conditions.

Summary

SEBI has issued a circular (HO/(68)2026-IMD-POD-2/I/5780/2026) directing mutual funds to change the valuation methodology for physical Gold and Silver held in ETF schemes. Effective April 01, 2026, the valuation will shift from the London Bullion Market Association (LBMA) AM fixing prices to polled spot prices published by SEBI-recognized domestic stock exchanges used for settlement of physically delivered Gold and Silver derivatives contracts.

Key Points

  • Current valuation of physical Gold and Silver in ETFs is based on LBMA AM fixing prices, adjusted for metric/currency conversions, transportation costs, customs duty, taxes, and notional premium/discount
  • New methodology: polled spot prices from recognized stock exchanges (used for settlement of physically delivered Gold/Silver derivatives) will replace LBMA-based valuation
  • The change is grounded in SEBI (Mutual Funds) Regulations, 2026 (notification no. LAD-NRO/GN/2026/294 dated January 14, 2026), specifically Regulation 22(9) and Regulation 63(9)
  • AMFI, in consultation with SEBI, will prescribe a uniform policy for implementation
  • The spot polling mechanism must comply with SEBI’s spot polling guidelines as issued from time to time
  • Issued under Section 11(1) of the Securities and Exchange Board of India Act read with Regulation 77 of SEBI (Mutual Funds) Regulations, 1996

Regulatory Changes

The valuation basis for physical Gold and Silver in mutual fund schemes changes from:

  • Previous: LBMA AM fixing prices with adjustments for currency conversion, transportation, customs duty, taxes, and notional premium/discount
  • New: Polled spot prices published by recognized domestic stock exchanges used for settlement of physically delivered Gold and Silver derivatives contracts

This change is enabled under SEBI (Mutual Funds) Regulations, 2026 (effective April 01, 2026), replacing the framework under SEBI (Mutual Funds) Regulations, 1996.

Compliance Requirements

  • All Mutual Funds / AMCs: Must adopt polled spot prices from recognized stock exchanges for valuing physical Gold and Silver from April 01, 2026
  • AMFI: Must prescribe a uniform valuation policy in consultation with SEBI before the effective date
  • Stock Exchanges: Spot polling mechanism must adhere to SEBI’s spot polling guidelines
  • Trustee Companies / Board of Trustees: Must ensure AMCs comply with the new valuation norms under the Seventh Schedule of SEBI (Mutual Funds) Regulations, 2026

Important Dates

  • January 14, 2026: SEBI (Mutual Funds) Regulations, 2026 notified (LAD-NRO/GN/2026/294)
  • February 26, 2026: This circular issued
  • April 01, 2026: New valuation methodology becomes effective for all Gold and Silver ETF/mutual fund schemes

Impact Assessment

For Investors: NAV calculations for Gold ETFs (e.g., GOLDBEES, NIPPON GOLD ETF) and Silver ETFs will reflect domestic spot prices rather than internationally derived LBMA prices, potentially reducing discrepancies between NAV and actual domestic market prices. This could improve price discovery and reduce tracking errors.

For AMCs: Requires system and process changes to source polled spot prices from recognized exchanges instead of LBMA data. AMCs must align with the uniform policy to be prescribed by AMFI before April 2026.

For Market: Greater reliance on domestic exchange infrastructure for benchmark pricing in the Gold/Silver ETF segment, increasing the importance of domestic spot polling mechanisms. Valuations will better reflect Indian market conditions (demand, import costs, local premiums) without manual adjustments.

Risk: Transition period between February 26 and April 01, 2026 requires coordinated action from AMFI, exchanges, and AMCs to ensure a smooth switchover without valuation discrepancies.

Impact Justification

Changes valuation methodology for Gold and Silver ETFs from LBMA AM fixing prices to domestic exchange polled spot prices, affecting NAV calculation for all Gold and Silver ETF schemes from April 2026. Impacts AMCs and investors in these schemes but is a procedural/methodology change rather than a market-wide policy shift.