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Mint
22-07-2025
- Business
- Mint
Sebi's local pricing plan for gold, silver ETFs faces calls for benchmark clarity
Mumbai: India's markets regulator is preparing a sweeping change in how gold and silver exchange-traded funds (ETFs) are valued, a move that could significantly alter pricing norms for a fast-growing segment of the country's mutual fund industry. The Securities and Exchange Board of India has proposed replacing the long-used London Bullion Market Association benchmark with domestic spot prices, aiming to simplify fund valuation and better align it with local market dynamics. The proposal, laid out in a consultation paper dated 16 July, has drawn a mix of cautious support and sharp scepticism from asset managers and industry bodies. Assets under management in Indian gold ETFs stood at ₹64,777 crore ($7.5 billion) as of June, up 89% from a year earlier, according to data from the Association of Mutual Funds in India (Amfi). Net inflows jumped 613% in June from May, reaching ₹2,081 crore—the highest in five months. A push for uniformity At the heart of the overhaul is an attempt to standardize how net asset values (NAVs) are calculated across fund houses. Today, ETF NAVs are based on LBMA reference prices, converted to rupees and adjusted for import duties and domestic premiums. 'However, this method varies across AMCs—some adjust daily, others weekly or monthly—creating inconsistencies," noted Radhika Gupta, managing director and chief executive, Edelweiss Asset Management Co. The LBMA standard price is set via a twice-daily electronic auction in London, reflecting near 24-hour global gold markets. By contrast, domestic benchmarks, such as those generated by the India Bullion and Jewellers Association (IBJA) or the Multi Commodity Exchange of India (MCX), are based on quotes submitted by local bullion dealers at specific times. High and low outliers are excluded before the average is calculated, but the polling captures only a limited domestic trading window. Gupta supports the shift, saying it promotes 'transparency, consistency, and fairness," and brings ETF pricing closer to physical gold. She added, 'What's important for AMCs is that this could significantly reduce operational and compliance burdens, as it eliminates the need for complex conversions and tax adjustments." For instance, if gold trades at $3,000/oz in London, fund houses must convert that into grams, apply the rupee exchange rate, add duties, and adjust for domestic premiums—steps that vary across AMCs and update schedules. That variation has real effects. Two gold ETFs holding identical assets can report different NAVs and performance. 'The idea behind this consultation paper is simple—ensure fair and consistent valuation of gold and silver ETFs across all AMCs," said Anil Ghelani, Head of Passive Investments & Products at DSP Mutual Fund. Ghelani added that while the current system is still fair, Sebi's proposed approach is more straightforward and uniform. 'Think of it like how a stock is valued in an equity index fund or ETF. While referring to the closing price of a particular stock for valuation, no matter which AMC you look at, that price stays the same. That's the kind of consistency we're aiming for with valuation of gold and silver held in commodities ETFs too." Domestic pricing: Simpler, but not without risks Still, the proposal has its critics. Surendra Mehta, national secretary at IBJA, questioned both the motivations behind the move and the reliability of domestic mechanisms. 'The prices keep moving for 23 hours a day, see the basic reason why they don't want LBMA price, you know why, because LBMA charges them $48,000 per year. So, almost 40 lakh rupees a year…So, that is why Sebi is now looking for the alternative." 'Commodity exchanges, if polling price, they are not expert in taking the polling. It is just a platform. If the London Bullion Market Association, that is LBMA, is expert in London, then in India, who is expert? IBJA is expert. So, why they are not taking prices from IBJA?" He noted that IBJA's twice-daily polling system is approved by the Reserve Bank of India. Fund managers also warn of valuation drift if polling practices differ across providers. For example, IBJA polls twice daily; MCX uses a single closing price. 'Why does Kotak Gold ETF's NAV differ from SBI Gold ETF on the same day?" asked Rishabh Nahar, partner and fund manager at Qode Advisors PMS. Without harmonized polling frequencies and pricing rules, NAVs could diverge even when holdings are identical, he cautioned. He also flagged a risk of "staleness" in NAVs, given that Indian pricing may miss global price movements that occur after local markets close. 'This staleness is significant: you could trade on a NAV that materially understates risk or overstates returns," Nahar said. That vulnerability became especially apparent in March-April 2020, when pandemic-related disruptions caused gold ETFs in India to trade 7-9% above their NAVs, Nahar said. Narinder Wadhwa, Managing Director & CEO of SKI Capital Services, said using Indian spot prices makes sense but warned of the risk of inconsistency. He stressed the importance of adhering to International Organization of Securities Commissions (IOSCO) standards for benchmarks, which require transparent methodology, conflict-of-interest controls, and solid governance. For the new system to earn credibility, Wadhwa said, domestic providers must provide greater transparency: 'Transparency on panel composition, frequency of review, and audit mechanisms is limited in the public domain. Disclosures on how outliers are treated, how average prices are computed (median vs mean), and how inactive days are handled are essential for investor trust." For the first time, both retail investors and fund managers would reference a shared, publicly disclosed domestic spot price, published by MCX or IBJA, eliminating the patchwork of AMC-specific adjustments that have long complicated comparisons. 'This clarity fosters trust—everyone sees identical inputs, and deviations between NAV and market price become easier to diagnose with the Sebi," Nahar said. In theory, this should reduce retail investor confusion about why two gold ETFs with identical holdings can trade at different NAVs, and help institutions streamline compliance and performance reporting. But transparency introduces new questions—chief among them, whether the slower pace of domestic pricing will keep up with global volatility. Because Indian spot benchmarks are typically set just once or twice a day—unlike the near-24-hour global gold market—sharp overnight moves in London or New York won't be reflected in ETF NAVs until the next domestic pricing window. 'Moreover, retail investors who place buy orders before the domestic open effectively lock in yesterday's prices, then immediately face mark-to-market losses if overnight prices gapped up. Over time, this misalignment can erode confidence in ETF fairness," Nahar cautioned. How Sebi addresses these concerns will determine whether the shift strengthens investor confidence, or undermines it.
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Business Standard
16-07-2025
- Business
- Business Standard
Sebi considering uniformity in valuation of gold, silver held by AMCs
Markets regulator Sebi is considering a review of the valuation methodology for physical gold and silver held by mutual funds through exchange-traded funds (ETFs) to ensure greater consistency and better alignment with prevailing domestic market prices. In this regard, Sebi has proposed that AMCs should use spot prices published by domestic commodity exchanges to value gold and silver, replacing the current practice of using LBMA prices, according to its consultation paper on Wednesday. It is also looking to identify a uniform domestic benchmark and make the detailed polling mechanism for spot price determination publicly available. Currently, gold held by any gold ETF scheme is required to be valued at the AM fixing price of the London Bullion Market Association (LBMA) in US dollars per troy ounce for gold having a fineness of 995.0 parts per thousand. Similarly, silver held by a silver ETF scheme is valued at the AM fixing price of the LBMA in US dollars per troy ounce for silver having a fineness of 999.0 parts per thousand. While the physical gold and silver held by gold and silver ETFs are valued based on the LBMA price after necessary conversions, the Exchange Traded Commodity Derivatives (ETCDs) on gold and silver held by mutual fund schemes are valued using the closing price of futures on the respective domestic commodity exchanges. This variation in valuation methods for the same underlying asset has highlighted the need for standardization. Accordingly, Sebi, in its consultation paper, "proposed that instead of using LBMA price as a starting point for valuation, it may be mandated that AMCs directly use the spot prices published by the domestic commodity exchanges to value the gold and silver," Sebi said. This will aid in the reduction of duplication of efforts and also represent the market prices of gold and silver as per the domestic demand and supply scenarios, it added. The move is expected to simplify the valuation process, which currently involves using LBMA prices in USD, converting them into INR, adding customs duties, and making adjustments for domestic demand or supply through notional premiums or discounts. Additionally, Sebi is looking to identify a domestic benchmark that should be adopted uniformly across the mutual fund industry for gold and silver valuation. At present, there are multiple sources of domestic spot prices such as commodity exchanges, jeweller associations, and index providers, leading to further inconsistency. Additionally, Sebi has also proposed that the detailed polling mechanism used by domestic regulated entities for determining spot prices -- including the methodology and policies ensuring fair conduct -- be made public. Currently, spot prices are derived through polling from participants in the physical market such as traders and importers, with exchanges applying statistical methods to calculate the final price. "The proposed change is expected to bring uniformity in the valuation process of gold and silver throughout the mutual fund industry for investments made by the gold and silver ETFs and more closely align their valuation with domestic prices of gold and silver," Sebi said. The Securities and Exchange Board of India (Sebi) has sought public comments till August 6 on the proposals.
New Straits Times
08-07-2025
- Business
- New Straits Times
Gold futures close higher on better demand
KUALA LUMPUR: The gold futures contract on Bursa Malaysia Derivatives ended higher on better demand amid news on the latest United States (US) imposition on tariffs, according to a trader. News reports meanwhile said US President Donald Trump's latest statements - warning of new tariffs on countries aligned with BRICS policies and setting an Aug 1 deadline for fresh negotiations with China - have triggered risk-off sentiments in the markets, pushing investors toward safe-haven assets like gold. The spot-month July 2025 contract rose to US$3,337.80 per troy ounce from US$3,320.80 on Monday, the August 2025 contract gained to US$3,353.20 from US$3,335.90, and the September 2025 contract increased to US$3,368.10 from US$3,350.80 previously. The October 2025, December 2025 and February 2026 contract each improved to US$3,386.90 from Monday's US$3,369.60. Trading volume went up to 31 lots versus 21 lots yesterday, while open interest increased to 61 contracts from 41 contracts previously. Physical gold was priced at US$3,315.35 per troy ounce, according to the London Bullion Market Association's afternoon fix on July 7, 2025.
Business Insider
23-06-2025
- Business
- Business Insider
Russia and Mali deepen trade ties, eye strategic nuclear energy deal
Russia has signed new agreements to strengthen trade and economic relations with Mali, as President Vladimir Putin hosted the West African country's military leader, Colonel Assimi Goita, in Moscow. Russia and Mali signed agreements aimed at bolstering trade and economic relations during a meeting at the Kremlin. Key discussions included cooperation in geological exploration, natural resource development, energy, logistics, and humanitarian efforts. An important deal was signed focusing on nuclear energy collaboration, aiming to construct a Russian-designed low-power nuclear plant in Mali. Russia has signed new agreements to strengthen trade and economic relations with Mali, as President Vladimir Putin hosted the West African country's military leader, Colonel Assimi Goita, in Moscow on Monday. The two leaders met at the Kremlin for a two-hour discussion, according to Russian state media. Putin described the relationship between Russia and Mali as following a 'positive trajectory,' though he acknowledged that current trade volumes remain modest, Reuters reported. He emphasized potential areas for deeper cooperation, including geological exploration, natural resource development, energy, logistics, and humanitarian efforts. One of the key deals signed was focused on nuclear energy cooperation. The two countries have previously discussed a strategic plan to build a Russian-designed low-power nuclear plant in Mali. The junta-led country is following a similar path to Burkina Faso, having taken a major step toward embracing nuclear energy by officially signing the final administrative document of a historic intergovernmental agreement with Russia last week. This landmark deal represents a significant milestone in Mali's efforts to diversify its energy sources and tackle the country's growing electricity needs, as it seeks long-term solutions to power shortages and boost national development. Russia's expanding footprint in Africa Earlier this month, construction also began on a new Russian-backed gold refinery in Mali. Set to be constructed on a five-hectare site near Bamako's international airport, the refinery will have the capacity to process up to 200 metric tons of gold annually, a significant leap from Mali's current processing capacity of about 50 tons. Though Mali is one of Africa's largest gold producers, it currently lacks a fully functional and globally certified refinery. The country's two existing facilities have been unable to meet the standards required by global bodies like the London Bullion Market Association (LBMA), forcing miners to refine their gold abroad. The new refinery will produce gold with a purity of 99.5%, adhering to international certification standards.
Business Insider
17-06-2025
- Business
- Business Insider
Junta-led Mali begins construction of gold refinery in partnership with Russia
Mali has begun building a new gold refinery backed by Russia, a move its military-led government says will help the country gain greater control over its natural resources. Mali is constructing a new gold refinery supported by Russian investment to enhance control over its natural resources. The refinery will be majority owned by the Malian government with a 38% stake held by Russian firm Yadran. This initiative aligns with regional efforts to mandate domestic processing of gold for economic benefits. Mali has begun building a new gold refinery backed by Russia, a move its military-led government says will help the country gain greater control over its natural resources. The newly formed refinery will be 62% owned by the Malian government, with Russian firm Yadran holding the remaining 38% stake. Speaking at the groundbreaking ceremony, interim President Colonel Assimi Goïta said the facility is part of broader efforts to require all mining companies to refine gold domestically under a revised mining code, though no timeline has been set for enforcement, according to Reuters. The refinery marks a shift across the Sahel region, where countries like Guinea, Niger, and Burkina Faso have also updated mining laws to mandate local processing, aiming to add value to exports and retain more revenue. Upgrade to global standard Since 1980, Mali's gold has been exported unprocessed to countries like the UAE, South Africa, and Switzerland, costing the country valuable income that could support economic development, according to Goïta. Despite the country's status as Africa's second-largest gold producer, it lacks an internationally certified refinery. The country's two existing facilities have been unable to meet the standards required by global bodies like the London Bullion Market Association (LBMA), forcing miners to refine their gold abroad. The new refinery will produce gold with a purity of 99.5%, adhering to international certification standards. Constructed on a five-hectare site near Bamako's international airport, the refinery will have the capacity to process up to 200 metric tons of gold annually, a significant leap from Mali's current processing capacity of about 50 tons. The refinery is part of Goïta's broader mining reforms since coming to power in 2021 and distancing Mali from Western allies. Goïta added that the refinery will improve gold traceability and help curb the billions lost to smuggling, a challenge many African nations face in the absence of certified refineries and tracking systems. Since seizing power in 2020, Mali's military government has vowed to overhaul the mining sector to ensure the state captures a larger share of gold revenues. These reforms are projected to boost annual government income by about $950 million, representing nearly 20% of the national budget.
