A Consultation Paper that proposes changes to the regulations concerning base price and price bands, including those for gold and silver ETFs, has been floated by the Securities and Exchange Board of India (SEBI) to review the price band framework for Exchange Traded Funds (ETFs).

Gold and silver Exchange Traded Funds (ETFs) listed on Indian stock exchanges may not be capturing the real volatility in the prices of these two precious metals. SEBI found three cases in 2025 where ETF prices moved more than 20% between one day’s close and the next day’s trading high. The maximum variation was 21.26%.

ETFs are listed on stock exchanges and are traded during trading hours like shares. They also have daily price limits called price bands. Currently, unlike shares, in the case of ETFs, no separate price bands have been prescribed. Stock exchanges currently apply a fixed price band of ±20% on the base price of ETFs.

SEBI proposes to fix the issue by dealing at two fronts — Base Price and the Price Bands.

The base price is essential for ETFs at the start of trading and is crucial for price discovery on stock exchanges. SEBI proposes that the base price on T Day may be either of the following:

  • Closing price of ETFs on T-1 Day (i.e. weighted average traded price of last 30 minutes).
  • Average iNAV of last 30 minutes on T-1 Day.
  • Closing NAV of T-1 Day (if available).

Currently, the Commodity ETFs like gold or silver ETFs having exposure to commodity derivatives, are permitted to disclose NAV by 9 am on the next day.

PRICE BANDS

Considering the recent high volatility (during the last week of January 2026) in gold and silver prices in the domestic/international market, the existing price bands for gold/silver ETFs (based on T-2 NAV) had become inadequate to ensure alignment of their market prices with the underlying assets. To address this issue, as an interim measure, T-1 Day Closing NAV/ Closing Price was used as the base price by exchanges for Gold/ Silver ETFs, said SEBI in the draft document.

SEBI proposed that there will be an initial price band of ±6%, which may be flexed up to ±20% during the trading day, subject to a cooling-off period.

After exhausting the initial price band, there will be a cooling-off period of 15 minutes, and the price band will be flexed by 3%.

In case the price movement in the international markets is more than the aggregate Daily Price Limit (DPL) of 9%, the same may be further relaxed in stages of 3% by the Exchange, with a cooling-off period of 15 minutes.

The single-day maximum variation of ±20% would be applicable. Essentially, the cooling-off period is the new big proposal that will help manage the intra-day volatility.

Unlike the popular opinion that gold ETFs and silver ETFs are investments in paper-form, the reality is that the fund house has to keep gold and silver as underlying assets. At times, there is a supply crunch leading to distortions in ETF prices, resulting in ETF units being traded at a premium.

Gold and Silver are internationally traded commodities. Their prices in India are influenced not only by what’s happening globally but are also subject to import duty and taxes. Additionally, a domestic premium is added before the ETF market price is calculated.

The ETF market in India is supposedly not deep enough, leading to days when the units are traded at a premium. There is still a differential of about 6-7% between the market price or the ETF price and the NAV of the ETF unit. What it means is that this divergence is not in favour of short-term investors.