Change in the silver market: India is shifting to using domestic spot prices in ETF funds
Global precious metal markets are constantly changing, and a recent decision in India has sparked much discussion about the pricing of silver and gold. The Securities and Exchange Board of India (SEBI) announced in February 2026 a new guideline that affects how gold and silver ETFs operating in India value the metals they hold.
According to the decision, starting April 1, 2026, Indian gold and silver ETFs will value physical metal based on domestic spot prices in India, rather than directly using the London Bullion Market Association reference price.
This is a technical change in the valuation of the funds. At the same time, it also has symbolic significance, as traditionally the reference prices for precious metals worldwide have been primarily established in the London and New York markets.
What does the change mean in practice?
An ETF (exchange-traded fund) often holds physical gold or silver on behalf of investors. The value of the fund is calculated daily based on the market value of the metals held by the fund.
Previously, Indian ETF funds were largely based on prices formed in the London markets, which are published by the London Bullion Market Association. After the new regulations, the valuation of the funds is based on domestic spot prices in India. These prices are formed in India's own commodity exchanges.
In practice, this means that Indian investment markets will now use more local price data.
Why is India significant in the silver market?
India is one of the largest consumers of precious metals in the world. In particular, the demand for silver there is very high.
Global silver mines produce about 820–840 million ounces of silver annually. The total demand for silver in India varies from year to year, but it has often been around 150–200 million ounces per year. This means that depending on the year, it accounts for about 15–25 percent of the total annual silver demand worldwide.
Silver is used in India for jewelry and decorative items, investment metals, industry and electronics, as well as solar energy.
The Western paper illusion vs. the physical reality of silver
When discussing the price of silver, one often encounters the claim that there is trading in much larger amounts of "paper silver" than there is physical metal available. This refers to derivative markets, such as the New York COMEX and the London bullion market.
In derivative markets, investors can buy and sell futures contracts that give the right to silver in the future. However, it is important to understand that some of the futures trading never results in physical delivery. Some contracts are closed before the expiration date or rolled over to the next contract month. Therefore, the nominal volumes in derivative markets can be much larger than the amount of physical silver.
Investors are also closely monitoring physical inventories. For example, in the COMEX exchange, part of the silver is classified as registered, which means the metal is registered for delivery against futures contracts. The amount of these inventories varies over time, and market interpretations of their significance also vary.
According to some analysts, the growing industrial demand, particularly in solar panels and electronics, may increase the significance of physical silver in the markets in the long term. Others emphasize that the pricing of precious metals will continue to be based on both financial markets and physical demand.
What does this mean for the investor?
Currently, there is a development in the precious metals markets where both financial markets and physical demand are increasingly influencing prices around the world. Markets like London and New York still play a central role, but at the same time, the high physical demand from Asian countries is gaining more weight in discussions about the true market level of precious metals.
The growing industrial demand for silver, for example in solar energy and electronics, increases the demand for the metal in the long term. At the same time, investors are closely monitoring inventory levels and the availability of physical metal in various markets. This combination of factors may influence how the value of silver is assessed in the future.
-The message for the investor is clear; the importance of physical precious metals is more pronounced than ever. When an investment is made directly in the metal, either in one's own possession or in allocated storage, the investor owns a tangible asset. Its value is not based solely on a contract or financial instrument, but on the metal itself., says Kimmo Korkiakoski, CEO of Jalonom.
