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Leading Economic Index says US economy is headed higher

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Conference Board LEI up for fifth consecutive month

The Conference Board is an independent research association. It publishes leading, coincident, and lagging indices for the United States every month.

Out of the three indices, the Conference Board Leading Economic Index (or LEI) is the most important. It tends to indicate what’s going to happen in the future.

The LEI is a weighted gauge of ten indicators designed to signal business-cycle peaks and valleys. A rise in the LEI indicates better future conditions.

For January 2015, the Leading Economic Index increased by 0.2% to 121.1 following December’s increase of 0.4%. This was the fifth straight month the index reported a rise. It’s important to note that this indicator is subject to revisions if any of its components get revised.

The LEI increased again in January, but its growth pace leveled off  in recent months, according to Ataman Ozyildirim, economist at the Conference Board.

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Impact on gold

Improving economic prospects for the United States will lead to a stronger US dollar. This, in turn, will make other investments more attractive, including equities and high-yield bonds.

We saw earlier in this series that gold and the US dollar are usually inversely related. So a strong set of leading indicators is negative for gold (GLD) and gold stocks such as Goldcorp (GG), Barrick Gold (ABX), Newmont Mining (NEM), and Agnico Eagle Mines (AEM).

The VanEck Vectors Gold Miners ETF (GDX) invests in senior and intermediate gold producers. GG, ABX, NEM, and AEM combined form 31.6% of its holdings.

In the next few parts of this series, we’ll look at US debt components and how they impact gold buying and selling behaviors.

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