Conference Board LEI
The Conference Board is an independent research association that publishes leading, coincident, and lagging indices for the US every month. Out of the three indices, the Conference Board LEI (Leading Economic Index) 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.
LEI increases the most in nine months
The Conference Board reported the LEI for April on May 21. For April 2015, the LEI increased by 0.7% to 122.3 following March’s increase of 0.4%. It surpassed market expectations. The market expected a 0.3% increase. It’s important to note that this indicator is subject to revisions if any of its components are revised.
The LEI rose in April along with seven of its ten component parts. Building permits and the interest rate spread—or the difference between the ten-year Treasury yield and the federal funds rate—contributed most to the rise. In contrast, the ISM (Institute for Supply Management) New Orders Index fell.
Impact on gold
The improved reading suggests that the US economy might be on its way up after a weak first quarter. Most of the first quarter was marred by transient factors including severe weather conditions and a strike at West Coast ports.
Improving economic prospects for the US should lead to a stronger dollar. In turn, this should make other investments more attractive—including equities.
Gold and the US dollar are usually inversely related. So, a strong set of leading indicators is negative for gold (GLD) and gold stocks like Iamgold (IAG), Barrick Gold (ABX), Royal Gold (RGLD), and Agnico Eagle Mines (AEM).