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Leading Economic Index Points to Moderate Expansion in the US

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Conference Board LEI up

The Conference Board is an independent research association that 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 may 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.

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The Conference Board reported the Leading Economic Index (or LEI) for February on March 19. For February 2015, the Leading Economic Index increased by 0.2% to 121.4 following January’s increase of 0.2%. This was the sixth straight month the index reported an increase. It’s important to note that this indicator is subject to revisions if any of its components are revised.

According to economist Ataman Ozyildirim, director of business cycles and growth research at The Conference Board, “Widespread gains among the leading indicators continue to point to short-term growth. However, easing in the LEI’s six-month change suggests that we may be entering a period of more moderate expansion.”

Impact on gold

Improving economic prospects for the United States should lead to a stronger dollar. This, in turn, should 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 Iamgold Corp (IAG), 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. Combined, GG, ABX, NEM, and AEM form 24.8% 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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