Good news in the economy is currently outweighing the bad news, which has market forecasters calling for healthy growth in stock markets and commodity prices this year.

At the Empire Club’s annual investment outlook event in Toronto on Thursday, Thomas Caldwell, founder of Caldwell Financial Ltd., said he expects equities to produce double-digit returns in 2011.

Caldwell pointed to a variety of supportive factors, such as improving economic performance, stronger corporate performance, low interest rates, low inflation and high corporate efficiencies.

“On balance, it’s a lot of good news,” he said.

Negative factors weighing on the market include new financial industry regulations in the U.S., which Caldwell said is creating confusion in the financial sector, and huge levels of government spending that continue to drive up deficits.

“The good news is being muted by some bad news, and that means in my mind, markets are not overpriced in Canada and the United States,” Caldwell said.

Peter Gibson, managing director at CIBC World Markets, agreed that equities would climb this year. He expects the S&P 500 index to hit at least 1,365, or potentially even higher than 1,400.

Gibson also expects commodity prices to climb this year. He expects oil to average a price between US$93 and US$100 a barrel, which will provide support to the Canadian dollar.

“I would expect the Canadian dollar to [range from] US$0.97 to US$1.03,” he said. “Most of the time, we’ll probably stay at parity or above parity this year.”

The price of gold is also set to advance this year, with Gibson targeting a price of US$1,580 an ounce.

Nick Barisheff, president and CEO of Bullion Management Group Inc., is much more bullish on the precious metal, predicting a price between US$1,700 and US$2,000 an ounce by the end of 2011.

A major factor contributing to this increase will be purchasing of gold by central banks such as those in China, Iran, Russia and India, according to Barisheff.

He noted that in the first 10 months of 2010, China imported 209.7 metric tonnes of gold – a 500% increase over the same period in 2009. He expects the country to continue acquiring vast amounts gold in order to bring its gold reserve ratio to outstanding currency closer to Western central banks.

“Chinese buying, both official and public, is a major trend that is not only well in place, but may be the single most important influence on the price of gold in 2011,” Barisheff said.

In the longer term, he expects the price of gold to continue to be supported by an aging population that will begin to retire and spend less, reducing GDP and tax revenues.

“Governments will have no choice but to create more currency and further debase it,” Barisheff said. “This will cause inflation to rise as currencies depreciate in value and create higher universal debt. All of this means the gold price will continue to rise.”

IE