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Leading Economic Index Remains in Growth Territory in February

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Conference Board LEI up for sixth 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’s 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 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 a rise. It’s important to note that this indicator is subject to revisions if any of its components get revised.

According to Ataman Ozyildirim, economist at the Conference Board, “With the February increase, the LEI remains in growth territory, but weakness in the industrial sector and business investment is holding economic growth back, despite improvements in labor markets and consumer confidence.”

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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 24.7% of its holdings.

 

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